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Compute the payback period for each of these two separate investments: A new operating system for an existing machine is expected to cost $270,000 and
Compute the payback period for each of these two separate investments:
- A new operating system for an existing machine is expected to cost $270,000 and have a useful life of five years. The system yields an incremental after-tax income of $77,884 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000.
- A machine costs $210,000, has a $14,000 salvage value, is expected to last ten years, and will generate an after-tax income of $43,000 per year after straight-line depreciation.
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