What is the payback period for the new machine

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Problem 1: A company is considering the purchase of a new machine for $62,000. Management predicts that the machine can produce sales of $17,400 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $6,600 per year including depreciation of $5,400 per year. Income tax expense is $4,320 per year based on a tax rate of 40%. What is the payback period for the new machine?

Multiple Choice

Option 1: 3.56 years.
Option 2: 6.60 years.
Option 3: 5.22 years.
Option 4: 11.48 years.
Option 5: 39.74 years.

Reference no: EM132979193

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