Exercise 24.4 Payback period; accelerated depreciation LO P1 A machine can be purchased for $150,000 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 Years Net income $10,000 $25,000 $50,000 $37,500 $100,000 Compute the machine's payback period (ignore taxes). (Round payback period to 3 decimal places.) Answer is not complete. Year Computation of Annual Depreciation Expense Annual Depr. Accumulated Beginning (40% of Book Depreciation at Book Value Value) Year-End 10,000 30,000 30.000 25,000 30,000 3 30,000 30,000 60,000 Ending Book Value (150.000) (110,000) (140,000) 1 2 3 4 5 Annual Cash Flows Year Net incomo Depreciation Not Cash Flow 0 1 $ (150,000) 10,000 25,000 50,000 37,500 100,000 30,000 30,000 30,000 2 3 4 5 (150,000) 40,000 80,000 37,500 100,000 Cumulative Cash Flow $ (150,000) (110,000) (55.000) 25,000 62,500 162,500 Payback period 2.69 3 years