A Company Is Considering the Purchase of a New Machine

question 110

Multiple Choice

A company is considering the purchase of a new machine for $128,000.Management predicts that the machine can produce sales of $32,000 each year for the next eight years.Expenses are expected to include direct materials,direct labor,and factory overhead totaling $7,500 per year plus depreciation of $10,800 per year.The company's tax rate is 38%.What is the payback period for the new machine?

• A) 4.00 years
• B) 6.63 years
• C) 9.34 years
• D) 15.06 years
• E) 5.22 years

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