A Company Is Considering the Purchase of a New Machine

Multiple Choice

A company is considering the purchase of a new machine for $48,000. Management predicts that the machine can produce sales of $16,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $12,000 per year including depreciation of $3,000 per year. The company's tax rate is 40%.
-What is the payback period for the new machine?

A) 8.9 years.
B) 12.0 years.
C) 20.0 years.
D) 6.0 years.
E) 7.5 years.