A company is considering purchasing a machine for $21,000. The machine will generate an after-tax net income of $2,000 per year. Annual depreciation expense would be $1,500. What is the payback period for the new machine?
A) 4 years.
B) 6 years.
C) 10.5 years.
D) 14 years.
E) 42 years.
B) 6 years.
Explanation: Payback period = $21,000/($2,000 + $1,500) per year = 6 years
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