A Company Is Considering Purchasing a Machine for $600,000

question 98

Short Answer

A company is considering purchasing a machine for $600,000.The machine is expected to generate a net after-tax income of $15,000 per year.Depreciation expense would be $60,000.What is the payback period for this machine?

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Definitions:

Merit-Pay Plan

A Merit-Pay Plan is a compensation strategy that rewards employees based on their performance and achievements, often used to incentivize higher productivity.

Profit-Sharing Pool

A financial arrangement where a portion of a company's profits is distributed to its employees.

Productivity Improvements

Enhancements in the efficiency and effectiveness of work processes, leading to higher output or quality with the same or lower input.

Annual Salary Increases

Regular, incremental adjustments to an employee's base pay, typically conducted on a yearly basis to keep up with market rates, inflation, or to reward performance.