A company is planning to purchase a machine that will cost $45,000 with a six-year life and no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?

Sales $123,000

Costs:

Manufacturing $63,000

Depreciation on machine 7,500

Selling and administrative expenses 41,000 (111,500)

Income before taxes $11,500

Income tax (30%) (3,450)

Net income $8,050

Multiple Choice

• 11.18 years.
• 2.11 year.
• 6.00 years.
• 2.89 years.
• 5.59 years.