A Company Is Considering the Purchase of a New Machine

question 51

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 8 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.