PlaylandPlayland

Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing

$1.51.5

million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows:

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(Click the icon to view the data.)Calculate the toy action figure project's payback period. If the toy action figure project had a residual value of

$ 125 comma 000$125,000,

would the payback period change? Explain and recalculate if necessary. Does this investment pass

PlaylandPlayland's

payback period screening rule?

Calculate the toy action figure project's payback period.

First enter the formula, then calculate the payback period. (Enter amounts in dollars, not millions. Round your answer to two decimal places.)

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Payback period

DATA:

Annual Net Cash Inflows
Year	Toy action	Sandbox toy
	figure project	project
1. . . . . . . . . . . . .	$317,750	$550,000
2. . . . . . . . . . . . .	317,750	390,000
3. . . . . . . . . . . . .	317,750	320,000
4. . . . . . . . . . . . .	317,750	260,000
5. . . . . . . . . . . . .	317,750	50,000
Total	$1,588,750	$1,570,000

PlaylandPlayland

will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%.