George's Garage Is Considering Purchasing a Machine for $75,000

question 132

Essay

George's Garage is considering purchasing a machine for $75,000. The machine is expected to generate a net after-tax income of $11,250 per year. This machine is to be depreciated over a 10-year period with no residual value.
Required:
What is the payback period, in years, for this machine (round answer to one decimal place)? (Assume that the cash inflows from this investment occur evenly throughout the year.)

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Definitions:

Price Elasticity of Demand

Determining how a change in a product's price affects the demand for that product.

Krispy Kreme Doughnut

A brand known for its signature glazed doughnuts and other sweet treats, operating worldwide.

Daily Sales

The total volume or value of products and services sold within a single business day.

Demand Price Elasticity

The responsiveness of the quantity demanded of a good to a change in its price; it measures how consumers react to price changes.