A Company Is Considering the Purchase of a New Machine

question 62

Multiple Choice

A company is considering the purchase of a new machine for $48,000.Management predicts that the machine can produce sales of $16,000 each year for the next 10 years.Expenses are expected to include direct materials,direct labor,and factory overhead totaling $12,000 per year including depreciation of $3,000 per year.The company's tax rate is 40%.What is the payback period for the new machine?

• A)20.0 years.
• B)6.0 years.
• C)7.5 years.
• D)12.0 years.
• E)8.9 years.

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Definitions:

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