Question
Camptown Togs, Inc., a children's clothing manufacturer, has always found payroll processing to be costly because it must be done by a clerk. The number
Camptown Togs, Inc., a children's clothing manufacturer, has always found payroll processing to be costly because it must be done by a clerk. The number ofpiece-goods coupons received by each employee is collected and the types of tasks performed by each employee are calculated. Not long ago, an industrial engineer designed a system that partially automates the process by means of a scanner that reads the piece-goods coupons. Management is enthusiastic about this system, because it utilizes some personal computer systems that were purchased recently. It is expected that this new automated system will save
$53 comma 00053,000
per year in labor. The new system will cost about
$38 comma 00038,000
to build and test prior to operation. It is expected that operating costs, including income taxes, will be about
$5 comma 0005,000
per year. The system will have a five-year useful life. The expected net salvage value of the system is estimated to be
$2 comma 5002,500.
Assume that the cash flows occur continuously throughout the year.
(a) How long does it take to recover the investment?
The payback period is
nothing
years. (Round to two decimal places.)
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