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:

Incumbent Monopoly

A situation where a single company dominates a market or industry, often due to having established a strong presence over time.

Excess Capacity

The situation in which a firm produces less than its potential output, often indicated by idle resources or facilities.

Potential Entrant

Refers to a business or company that is not currently in a market but has the capability and interest to enter the market if certain conditions are met.

Dominant Strategy

A strategy in game theory that yields the best outcome for a player regardless of what strategies other players choose.