3. Schultz Company is considering purchasing a machine that would cost $478,800 and have a useful life of 5 years. The machine would reduce cash operating costs by $114,000 per year. The machine would have a salvage value of $6,200. Schultz Company prefers a payback period of 3.5 years or less. Required:

a. Compute the payback period for the machine. What does this mean?

b. Compute the return on average investment (ROI)