A New Manufacturing Machine Is Expected to Cost $278,000,have an Eight-Year

question 115

Multiple Choice

A new manufacturing machine is expected to cost $278,000,have an eight-year life,and a $30,000 salvage value.The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation.Compute the payback period for the purchase.

• A)8.7 years.
• B)3.8 years.
• C)4.2 years.
• D)7.3 years.
• E)5.4 years.

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Definitions:

Collection

An effort to accumulate amounts due from debtors, or the process of recovering financial obligations.

Conceptual Framework

A system of ideas and objectives that guides the development of standards and practices in financial reporting and accounting.

Financial Reporting

Financial reporting involves the disclosure of financial information to various stakeholders about the financial performance and position of an organization over a specific period of time.

Measurement

The process of quantifying qualitative financial data in monetary terms through various accounting methods.