a company is planning to purchase a machine that will cost $47,652, have a six-year life, and will have no salvage value. the company expects to sell the machine's output of 3,000 units evenly throughout each year. a projected income statement for each year of the asset's life appears below. what is the payback period for this machine? sales $ 171,000 costs: manufacturing $ 102,600 depreciation on machine 4,000 selling and administrative expenses 57,000 (163,600) income $ 7,400

Payback is the time period required to recover the initial investment cost. It is a measure of the cash flow generated by the investment over a specific period of time. Payback is an important concept for businesses to understand, as it can help to determine how much money is available for reinvestment or other uses. Payback periods can also be used to compare competing investments, with shorter payback periods generally indicating higher returns. Additionally, businesses must consider the long-term profitability of investments, as payback periods may not always properly reflect the true worth of an investment

Payback period is calculated by dividing the total cost of the machine ($47,652) by the annual income ($7,400). Therefore, the payback period is 6.7 years:

47,652 / 7,400 = 6.7

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