A machine can be purchased for $271,000 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 $ 19,500 $ 30,000 $ 59,000 $ 60,000 $ 135,000 Compute the machines payback period (ignore taxes). (Round payback period answer to 3 decimal places.)

4 A machine can be purchased for $271,000 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. 2 points Net income Year 1 $19,500 Year 2 $30,000 Year 3 $59,000 Year 4 $60,000 Year 5 $135,000 Compute the machine's payback period (ignore taxes). (Round payback period answer to 3 decimal places.) X Answer is complete but not entirely correct. Year Ending Book Value 1 Computation of Annual Depreciation Expense Beginning Annual Depr. Accumulated Book (40% of Book Depreciation at Value Value) Year-End 271,000 108,400 108,400 162,600 65,040 65,040 X 97,560 39,024 104,064 58,536 23,414 127,478 35,122 14,048 X 141,526 2 3 162,600 97,560 58,536 35,122 21,074 4 5 Year 0 1 Net income $ (271,000) 19,500 30,000 59,000 60,000 135,000 Annual Cash Flows Cumulative Depreciation Net Cash Flow Cash Flow $ (271,000) 108,400 (251,500) X 65,040 12,000 X (221,500) X 39,024 98,024 (123,476) 23,414 83,414 (40,062) 14,048 149,048 108,986 7,800 x 2 3 4 5 Payback period = 3.754 X years