Investing in new equipment will require an initial investment of $2,400,000, with annual costs of $300,000, and annual benefits of $700,000. At the end of the equipments 10-year life, a cost of $500,000 will be incurred to dispose of it.

What is the crude (non -discounted) payback period for this investment?

At a discount rate of 7%, would you expect the discounted payback to be sooner, later, or the same as the simple (crude) payback?

If your companys discount rate really was equal to 7%, do you think the discounted payback method would adequately summarize the desirability of this project? Why or why not?