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

A new operating system for an existing machine is expected to cost $240,000 and have a useful life of five years. The system yields an incremental after-tax income of $69,230 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $9,000.

A machine costs $180,000, has a $13,000 salvage value, is expected to last eleven years, and will generate an after-tax income of $38,000 per year after straight-line depreciation.

Payback Period
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