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:

Romberg Test

A neurological test that assesses the sense of balance and proprioception, wherein an individual is asked to stand with feet together and eyes closed to detect problems in the vestibular or proprioceptive systems.

Vestibular Apparatus

A complex system within the inner ear that provides information about spatial orientation and balance.

Weber Test

A quick screening test for hearing that involves placing a tuning fork in the center of the forehead to help diagnose unilateral (one-sided) hearing loss.

Snellen Test

A visual acuity test using a chart with letters of varying sizes to determine how well a person can see at a distance.