A company is planning to purchase a machine that will cost $24,000 with a six-year life and 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 below. What is the payback period for this machine? Sales $90,000 Costs: Manufacturing$52,000 Depreciation on machine 4,000 Selling and administrative expenses 30,000 (86,000) Income before taxes $4,000 Income tax (50%) (2,000) Net income $2,000
A. 24 years.
B. 12 years.
C. 1 year.
D. 4 years.
E. 6 years.
Answer: D
You might also like to view...
Which of the following would be considered part of the category "trade receivables"?
a. Advances to employees b. Amounts due from customers c. Dividends receivable d. Income tax refunds receivable
Larry wanted to buy a 1957 Cadillac once owned by Reggie Jackson. Larry entered into a contract with the owner agreeing to pay $102,000 . The owner subsequently changed his mind. If Larry sues, what remedies are potentially available?
A+ Modeling Agency signs a contract with Sandi to do a photo shoot for the local used car dealer's advertising. The contract was most likely written by
a. the owner of A+ Modeling Agency. b. Sandi. c. A+ Modeling Agency's lawyer. d. Sandi's lawyer.
The subprime financial crisis led to one of the worst bear markets in the last 50 years. Stock prices likely fell due to
A) an increase in required returns on equity investments. B) a decline in growth prospects for U.S. companies. C) Both A and B are likely reasons. D) None of the above are correct.