A company is planning to purchase a machine that will cost

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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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