### 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

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