MC Qu. 89 A company is planning...

A company is planning to purchase a machine that will cost $54,000 with a six-year life and no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?

Sales				$	120,000
Costs:
Manufacturing	$	62,000
Depreciation on machine		9,000
Selling and administrative expenses		40,000			(111,000	)
Income before taxes				$	9,000
Income tax (35%)					(3,150	)
Net income				$	5,850

Multiple Choice

• 9.23 years.

• 1.36 year.

• 3.64 years.

• 18.46 years.

• 6.00 years.