A Company Is Considering Purchasing a Machine for $75,000

question 3

Essay

A company is considering purchasing a machine for $75,000. The machine is expected to generate a net after-tax income of $11,250 per year. Depreciation expense would be $7,500. What is the payback period for this machine?

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Definitions:

Estimated Taxes

Periodic advance payments of taxes on income that is not subject to withholding, such as earnings from self-employment, interest, dividends, and rental income.

FUTA Tax

Federal Unemployment Tax Act tax, a payroll or employment tax paid by employers to fund state workforce agencies.

Withholding Allowances

A specified number on an employee's W-4 form that reduces the amount of money withheld from their paycheck for taxes.

Semimonthly Payroll

A payroll schedule where employees receive their wages twice a month, often on predetermined dates.