Answered: What is the payback period in years…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Milagros Company is considering an investment in equipment for $60,000. Milagros uses the straight-line method of depreciation with no mid-year convention. In addition, its tax rate is 40 percent and the life of the equipment is five years with no salvage value. The expected income before depreciation and taxes is projected to be $30,000 per year. What is the payback period in years approximated to two decimal points?

Group of answer choices

2.63

2.00

1.00

4.00

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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