Vandezande Inc. is considering the acquisition of a new machine that costs $370,

ID: 2474361 • Letter: V

Question

Vandezande Inc. is considering the acquisition of a new machine that costs $370,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are:

Year 1

Year 2

Year 3

Year 4

Year 5

Incremental net cash inflows

$128,000

$105,000

$126,000

$123,000

$122,000

Incremental net operating income

$54,000

$31,000

$52,000

$49,000

$48,000

The payback period of this investment, rounded off to the nearest tenth of a year, is closest to:

A) 2.9 years

B) 4.9 years

C) 3.1 years

D) 5.0 years