Payback Period

Kilebrew Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $2,400,000 and either has:

Even cash flows of $200,000 per year or

The following expected annual cash flows: $300,000, $300,000, $800,000, $800,000, and $200,000.

Required:

Calculate the payback period for each case.

a. _________ Years
b. _________ Years