Acompany is considering the purchase of a new machine for $54,000. management predicts that the machine can produce sales of $16,600 each year for the next 10 years. expenses are expected to include direct materials, direct labor, and factory overhead totaling $7,400 per year including depreciation of $4,600 per year. the company's tax rate is 40%. what is the payback period for the new machine?

a. 6.28 years.
b. 26.47 years.
c. 11.74 years.
d. 5.34 years.
e. 3.25 years.

Payback Period = 5.34 years

so correct option is d. 5.34 years

Explanation:

given data

purchase machine = $54,000.

sales = $16,600

time = 10 year

Expenses = $7400

depreciation = $4,600 per year

tax rate = 40%

to find out

payback period for the new machine

solution

we get here earning before tax that is express as

earning before tax EBT = Sales - Expenses   .............1

put her value we get

earning before tax EBT =$16600 - $7400

EBT = $9260

so we get here Tax for 40% that is

tax for 40%  = 0.40 × $9260

tax for 40% = $3680

and

so net income = $5520

and

Cash Flow = net income + depreciation    

Cash Flow = $5520 + $4600

Cash Flow = $10120

so Payback Period will be her as

Payback Period = Investment ÷  Annual Cash Flow    ...................2

Payback Period =

Payback Period = 5.34 years

so correct option is d. 5.34 years

answers

a: apartment building

b: bank

d: office.

hope it

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough