Question

MC Qu. 89 A company is planning... A company is planning to purchase a machine that will cost $57,000 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

Answer 1

The payback period for this machine is = 3.01 years

Step-by-step explanation:

Solution

Payback Period = Investment Required (Cost of Asset), Net annual cash Inflow

so,

The Cost of Asset=$57,000

Now,

The Net annual cash Inflow =Net Income after Tax + Depreciation

=$ 9425 + $ 9500 = $18,925

Thus, Payback Period is = $57,000/18925

= 3.01 Years

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