A company is planning to purchase a machine that will cost $24,000, have a six-year life, and 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
What is the payback period for this machine?
Sales $90,000
Cost:
Manufacturing $52,000
Depreciation on machine .......... 4,000
Selling and administrative expenses ....... 30000 86000
Income before taxes $4000
Income tax (50%) (2,000)
Net income $2.000