Compute the payback period for each of these two separate investments:

1. A new operating system for an existing machine is expected to cost $260,000 and have a useful life of five years. The system yields an incremental after-tax income of $75,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000.
2. A machine costs $200,000, has a $14,000 salvage value, is expected to last eight years, and will generate an after-tax income of $41,000 per year after straight-line depreciation.

Payback Period
	Choose Numerator:	/	Choose Denominator:	=	Payback Period
	Cost of investment	/	Annual net cash flow	=	Payback period
a.	$260,000	/	$125,000	=	2.08	years
b.				=	0