(LO 10)A company is considering the purchase of a new machine for $55,000. Management predicts that the machine can produce sales of $16,700 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $7,300 per year including depreciation of $4,700 per year. Income tax expense is $3,760 per year based on a tax rate of 40%. What is the payback period for the new machine?

Multiple Choice

• 3.29 years.
• 6.32 years.
• 5.32 years.
• 11.70 years.
• 27.78 years.