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Assume that a company buys a new machine for $220,000 that has a useful life...

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Accounting

Assume that a company buys a new machine for $220,000 that has a useful life of five years and a $20,000 salvage value. The new machine will replace an old machine that can be sold for a salvage value of $10,000. The machine will generate incremental contribution margin of $37,500 per year. The only fixed expense associated with the new machine is its annual depreciation of $40,000 per year. What is the payback period for this investment?

Multiple Choice:

12.6 years

5.6 years

5.167 years

11.6 years

Answer & Explanation Solved by verified expert
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