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A Company is trading in a fully depreciated old asset for a new one. Cost of the new asset is $5,000 with a 5-year life

A Company is trading in a fully depreciated old asset for a new one. Cost of the new asset is $5,000 with a 5-year life and straight-line depreciation will be used. The company receives a $500 allowance for the asset traded in. Additional sales revenue from the investment will be $2,100 and expenses of $400 (excluding depreciation). The company is in a 25% tax bracket. The payback period is:

2.95 years
3.46 years
8.33 years
7.50 years

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