Question
Compute the payback period for each of these two separate investments: a. A new operating system for an existing machine is expected to cost
Compute the payback period for each of these two separate investments: a. A new operating system for an existing machine is expected to cost $250,000 and have a useful life of four years. The system yields an incremental after-tax income of $72,115 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. b. A machine costs $190,000, has a $13,000 salvage value, is expected to last seven years, and will generate an after-tax income of $39,000 per year after straight-line depreciation. a b Answer is complete but not entirely correct. Payback Period Choose Numerator: Choose Denominator: Payback Period Cost of investment Annual net cash flow Payback period SS 250,000 ( 132,115 1.89 years 190,000 IS 52,982 3.59 years
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