Griffith Corporation is considering an investment in a labor-saving machine. Information on this machine follows: Cost $30,000 Salvage value in five years $0 Estimated life 5 years Annual depreciation $6,000 Annual reduction in existing costs $8,000 Refer to Griffith Corporation. What is the payback period on this investment?
a. 4 years
b. 2.14 years
c. 3.75 years
d. 5 years
C
Payback Period = Initial Investment/Cash Savings
= $30,000/$8,000
= 3.75 years
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