Fitzgerald Company Is Planning to Acquire a $250,000 Machine That

Multiple Choice

Fitzgerald Company is planning to acquire a $250,000 machine that will provide increased efficiencies, thereby reducing annual cash operating costs by $80,000. The machine will be depreciated by the straight-line method over a five-year life, with no salvage value at the end of five years. Assuming a 40% income tax rate, t, and that cash flows occur evenly throughout the year, the machine's estimated payback period (rounded to two decimal places) is:

A) 3.13 years.
B) 3.21 years.
C) 3.68 years.
D) 4.81 years.
E) 5.21 years.