A company is planning to purchase a machine that will cost $31,200, have a six-year life, and be depreciated over a three-year period with 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		$126,000
Cost:
Manufacturing	$53,200
Depreciation on machine	5,200
Selling and administrative expenses	42,000	(100,400)
Income before taxes		$25,600
Income tax (40%)		(10,240)
Net income		$15,360

2.03 years.

6.00 years.

1.52 years.

4.06 years.

3.48 year.