A company is planning to purchase a machine that will cost

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Reference no: EM13575011

A company is planning to purchase a machine that will cost $26,400, has a six-year life, and would 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 below. What is the payback period for this machine?

Sales		$102,000
Cost:
Manufacturing	$52,400
Depreciation on machine	4,400
Selling and administrative expenses	34,000	(90,800)

Income before taxes		$11,200
Income tax (35%)		(3,920)

Net income		$7,280

Reference no: EM13575011

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