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5 September, 21:08

A company is considering purchasing a machine that costs $400,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used. The cash payback period on the machine is Question 9 options: 8.0 years. 7.5 years. 6.5 years. 3.2 years

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  1. 5 September, 21:19
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    6.5 years

    Explanation:

    Cost of Asset/Net Income = $400,000/Net Income

    Net Income = Revenue - Operating expenses (excluding depreciation)

    = $100,000 - $38,000 = $62,000

    =$400,000/$62,000

    =6.45

    =6.5 years
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