CH 11 EX 11-5

Compute the payback period for each of these two separate investments: a. A new operating system for an existing machine is expected to cost $280,000 and have a useful life of five years. The system yields an incremental after-tax income of $80,769 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $11,000. b. A machine costs $200,000, has a $15,000 salvage value, is expected to last eleven years, and will generate an after-tax income of $44,000 per year after straight-line depreciation. Payback Period Choose Numerator: / Choose Denominator: II Payback Period Payback period II a. II b. =