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Pique Corporation wants to purchase a new machine for $290,000. Management predicts that the machine can produce sales of $198,000 each year for the next
Pique Corporation wants to purchase a new machine for $290,000. Management predicts that the machine can produce sales of $198,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $88,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined Income tax rate is 30%. Management requires a minimum after-tax rate of return of 14% on all Investments. What is the payback period for the new machine (rounded to nearest one-tenth of a year? (Assume that the cash Inflows occur evenly throughout the year.) Multiple Choice o 3.6 years. 4.2 years. 2.7 years 2.5 years O O 3.1 years
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