Build Corporation wants to purchase a new machine for $286,000. Management predicts that the machine can produce sales of $206,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $81,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Build's combined income tax rate is 30%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the payback period for the new machine (rounded to nearest one-tenth of a year)? (Assume that the cash inflows occur evenly throughout the year.)

Multiple Choice

• 2.1 years.

• 2.3 years.

• 2.7 years.

• 3.2 years.

• 3.8 years.