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Exercise 24-3 Payback period computation; straight-line depreciation LO P1 A machine can be purchased for $60,000 and used for five years, yielding the following net

Exercise 24-3 Payback period computation; straight-line depreciation LO P1

A machine can be purchased for $60,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line 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 $ 3,900 $ 9,900 $ 32,000 $ 14,700 $ 39,600

Compute the machines payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places.)

Year Net Income Depreciation Net Cash Flow Cumulative Cash Flow
0 (60,000) $(60,000)
1 $3,900
2 9,900
3 32,000
4 14,700
5 39,600
Payback period =

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