Answer:
option (c) 8 years
Explanation:
Data provided in the question:
Cost of the machine = $240,000
Useful life = 10 years
Salvage value = 0
Net income = $6,000 each year
Now,
Using the straight-line method of depreciation
Annual depreciation = [ Cost - Salvage value ] ÷ Useful life
= [ $240,000 - 0 ] ÷ 10
= $24,000
Thus,
Cash flow = $6,000 + $24,000
= $30,000
Therefore,
The payback period = ( Cost ) ÷ ( Cash flow )
= $240,000 ÷ $30,000
= 8 years
Hence,
the correct answer is option (c) 8 years
