Playland Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1.1 million. Each machine has a lifespan of 5 years and is expected to generate annual cash flows of $400,000 for the toy action figure project and $300,000 for the sandbox toy project. To calculate the payback period for the toy action figure project, we need to determine how long it will take for the project's cumulative cash flows to equal or exceed the initial investment of $1.1 million. The payback period formula is as follows: Payback period = Initial investment / Annual cash flow For the toy action figure project, the initial investment is $1.1 million and the annual cash flow is $400,000. Payback period = $1,100,000/$400,000 = 2.75 years Therefore, the payback period for the toy action figure project is 2.75 years. If the toy action figure project had a residual value of $150,000, the payback period would not change. The payback period only considers the initial investment and the annual cash flows. The residual value does not affect the payback period calculation. To determine if this investment passes Playland's payback period screening rule, we need to compare the calculated payback period to the company's predetermined payback period threshold. If the calculated payback period is less than or equal to the threshold, the investment passes the screening rule. Title with topic: Payback Period Calculation for Toy Action Figure Project