A machine can be purchased for $207,000 and used for five years, yielding the following net incomes. In projecting net incomes, double-declining depreciation is applied using a five-year life and a zero salvage value.

	Year 1				Year 2				Year 3				Year 4				Year 5
Net income		$	18,500			$	46,000			$	56,000			$	39,000			$	132,000

Computation of Annual Depreciation Expense
Year	Beginning Book Value	Annual Depr. (40% of Book Value)	Accumulated Depreciation at Year-End	Ending Book Value
1
2
3
4
5
Annual Cash Flows
Year	Net income	Depreciation	Net Cash Flow	Cumulative Cash Flow
0	$(207,000)			$(207,000)
1	18,500
2	46,000
3	56,000		56,000	56,000
4	39,000		39,000	95,000
5	132,000		132,000	227,000
Payback period =					years