Gadwall Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new high-efficiency washing machines that will allow for the laundry's status to be checked via smartphone. Gadwall estimates the cost of the new equipment at $164,000. The equipment has a useful life of 9 years. Gadwall expects cash fixed costs of $76,000 per year to operate the new machines, as well as cash variable costs in the amount of 5% of revenues. Gadwall evaluates investments using a cost of capital of 8% 1. Calculate the payback period and the discounted payback period for this investment, assuming Gadwall expects to generate $160,000 in incremental revenues every year from the new machines. 2. Assume instead that Gadwall expects an uneven stream of incremental cash revenues from installing the new washing machines. Based on this estimated revenue stream, what are the payback and discounted payback periods for the investment? A B D E F G H J 1 Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 $ 80,000 $ 125,000 $ 120,000 $130,000 $ 155,000 $160,000 $120,000 $155,000 $180,000 2 Projected Revenue