NUBD Co. purchased a new machine on January 1 of this year for an amount of P85,000, with an estimated useful life of 5 years and a salvage value of P10,000. The machine will be depreciated using the straight-line method. The machine is expected to produce cash flows from operations, net of income taxes, of P36,000 a year in each of the next 5 years. The new machine’s salvage value is P20,000 in years 1 and 2, and P15,000 in years 3 and 4. What will be the bail-out period (rounded) for this new machine?

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