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What is the payback period for this investment

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Reference no: EM132746040

Question - Assume that a company buys a new machine for $220,000 that has a useful life of five years and a $20,000 salvage value. The new machine will replace an old machine that can be sold for a salvage value of $10,000. The machine will generate incremental contribution margin of $42,000 per year. The only fixed expense associated with the new machine is its annual depreciation of $40,000 per year. What is the payback period for this investment?

a. 11.0 years

b. 5.0 years

c. 12.0 years

d. 5.167 years

Reference no: EM132746040

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