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Exercise 11-5 Payback period computation; even cash flows LO P1 Compute the payback period for each of these two separate investments: a. A new operating
Exercise 11-5 Payback period computation; even cash flows LO P1 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 six 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 $180,000, has a $13,000 salvage value, is expected to last eleven years, and will generate an after-tax income of $39,000 per year after straight-line depreciation, Payback Period = Choose Numerator: Choose Denominator: Cost of investment / Annual net cash flow $ 250,000/ $ 180,000/ Payback Period Payback period 0 a. b 0
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