A machine can be purchased for $160,000 and used for five years,yielding the following net incomes. In projecting net incomes,straight-line depreciation is applied, using a five-year life and azero salvage value.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
Net income | | $ | 10,700 | | | $ | 26,700 | | | $ | 57,000 | | | $ | 40,100 | | | $ | 106,800 | |
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Compute the machine’s payback period (ignore taxes). (Roundyour intermediate calculations to 3 decimal places and roundpayback period answer to 3 decimal places.)
Year NetIncome Depreciation Net CashFlow Cumulative Cash Flow
0 (160,000) $(160,000)
1 $10,700
2 26,700
3 57,000
4 40,100
5 106,800
Payback period=
