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Helicopter Gear is planning to expand its product line, which requires investment of $557,900 in special-purpose machinery. The machinery has a useful life of
Helicopter Gear is planning to expand its product line, which requires investment of $557,900 in special-purpose machinery. The machinery has a useful life of seven years and no salvage value. The estimated annual results of offering the new products are as follows: Revenue $ 530,500 $ 26,900 Expenses (including straight-line depreciation) (503,600) Increase in net income All revenue from the new products and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. The payback period for this proposed investment is: O a. 5.2 years. O b. 10.4 years. O c. 7.0 years. O d. 2.6 years. Neville Company is considering an investment of $380,000 in heavy equipment, which will enable the company to be more competitive in the construction industry. The useful service life of the equipment is estimated to be 10 years, with $30,000 salvage value. Straight-line depreciation is used. The company estimates that net income will increase by $41,000 per year as a result of the company's ability to handle a wider range of projects with the new equipment. The payback period for this investment is approximately: O a. 4.7 years. O b. 9 years. c. 5 years. O d. 8.75 years.
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