Max is planning to buy an equipment. Model X cost $300 to purchases and result is a costing savings of $150 per year, and last for 5 years. Model Z cost $450, result in costs savings of $130 per year, and last for 10 years. The discount rate is 20%.

Required:

c. Calculate the Payback period for both the models.

d. Which model should Max buy.

e. If the inflation rate is expected to be 10%, will your advice to Max change.