Payback

To receive credit you must show the intermediate results in how you arrived at your answer. An answer without showing the calculations, even if correct, receives zero credit.

1. Determine the payback period when the after-tax investment cost is $48,000 and the annual after-tax earnings improvement is $15,000.

2. Determine the payback period when the after-tax investment cost is $25,000 and the annual after-tax earnings improvement is $7,000.

3. Determine the payback period when the after-tax investment cost is $35,000 and the annual after-tax earnings improvement is $20,000.

4. Determine the payback period for a piece of equipment that has an after-tax cost of $55,000, and that improves the after-tax earnings by the following annual amounts. (Just keep adding up the savings until they meet or exceed the initial cost.) a. Year 1: $11,000 b. Year 2: $10,000 c. Year 3: $9,000 d. Year 4: $8,000 e. Year 5: $7,000 f. Year 6: $6,000 g. Year 7: $5,000 h. Year 8: $4,000 i. Year 9: $3,000 j. Year 10: $2,000 k. Year 11: $1,000 l. Years 12 and beyond: $0

5. Determine the payback period for a piece of equipment that has an after-tax cost of $24,000, and that improves the after-tax earnings by the following annual amounts. a. Year 1: $8,000 b. Year 2: $7,000 c. Year 3: $6,000 d. Year 4: $5,000 e. Year 5: $4,000 f. Year 6: $3,000 g. Year 7: $2,000 h. Year 8: $1,000 i. Years 9 and beyond: $0