Boccardi Inc., has invested in new pasta manufacturing equipment at a cost of $48,000. The equipment has an estimated useful life of eight years. Estimated annual sales and operating expenses related to the pasta equipment follow: Annual sales $ 88,000
Labor costs (72,000)
Depreciation of equipment (6,000)
Operating income $ 10,000
Income taxes (4,000)
Net income $ 6,000
The estimated payback of the investment in the pasta equipment is:
a. 3.0 years.
b. 4.0 years.
c. 6.0 years.
d. 8.0 years.