A company is planning to purchase a machine that will cost $27,000 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$93,000Costs:Manufacturing$53,000Depreciation on machine4,500Selling and administrative expenses31,000(88,500)Income before taxes$4,500Income tax (35%)(1,575)Net income$2,925

Multiple Choice

• 3.64 years.
• 9.23 years.
• 6.00 years.
• 1.36 year.
• 18.46 years.