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:

Periodic Filings

Mandatory reports filed by publicly traded companies at regular intervals as required by regulatory authorities.

Reconciliation Statements

Reconciliation Statements are financial documents that compare two sets of records to check that figures are correct and in agreement, commonly used to reconcile bank statements to accounting records.

Perpetual Filings

Continuous or ongoing filing requirements for entities such as corporations, often related to regulatory compliance.

Employee Stock Plans

Programs established by a company to provide its employees with an opportunity to acquire shares of the company, often at a discounted price.