Item11

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01:02:09

Item 11

Time Remaining 1 hour 2 minutes 9 seconds

01:02:09

A company is considering the purchase of a machine that will be used to manufacture a new product next year. The machine has the following features:

Cost		$ 150,000
Useful life		5 years
Salvage value		$ 10,000
Expected production per year		7,000
Product selling price per unit		$ 25

The company expects the machine to generate annual net income of $ 50,000 and to produce net cash flows evenly throughout the year. What is the payback period for this investment?

Multiple Choice

• 2.15 years.

• 1.92 years.

• 1.88 years.

• 3.00 years.

• 2.74 years.