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24 July, 03:01

Omaha Plating Corporation is considering purchasing a machine for $1,500,000. The machine is expected to generate a constant after-tax income of $100,000 per year for 15 years. The firm will use straight-line (SL) depreciation for the new machine over 10 years with no residual value. What is the payback period for the new machine?

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  1. 24 July, 03:16
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    The payback period for the new machine is 6 years.

    Explanation:

    depreciation = $1,500,000/10

    = $150,000

    payback period = ($100,000 + $150,000) / $1,500,000

    = 6 years

    Therefore, The payback period for the new machine is 6 years.
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