A Company Is Considering the Purchase of a New Machine

question 112

Multiple Choice

A company is considering the purchase of a new machine for $48,000. Management predicts that the machine can produce sales of $16,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $8,000 per year plus depreciation of $4,000 per year. The company's tax rate is 40%. What is the payback period for the new machine?

• A) 3.0 years.
• B) 6.0 years.
• C) 7.5 years.
• D) 12.0 years.
• E) 20.0 years.

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Definitions:

Competition Act

Legislation aimed at preventing anti-competitive practices in the marketplace, protecting consumers, and promoting fair and efficient competition.

Fixed Price

A pricing strategy where the price of a product or service is agreed upon and does not change, regardless of market fluctuations.

Competition Tribunal

A specialized tribunal dealing with matters related to competition law, including mergers, monopolistic practices, and other issues that may affect fair competition.

Competition Act

Legislation intended to promote and maintain fair competition in the marketplace.