Reference no: EM131814873

A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears

What is the payback period for this machine?

Sales                                                                         $90,000

Cost:

Manufacturing                                          $52,000

Depreciation on machine ..........               4,000

Selling and administrative expenses .......  30000          86000

Income before taxes                                                   $4000

Income tax (50%)                                                      (2,000)

Net income                                                                $2.000