Problem #4 Chapter 11 Capital Budgeting and Investment Analysis a. A new operating system for an existing machine is expected to cost $250,000 and have a useful life of 5 years. The system yields an incremental after-tax income of $72,200 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. b. A machine costs $215,000, has a $35,000 salvage value, is expected to last 9 years, and will generate an after-tax income of $46,400 per year after straight-line depreciation. Compute the payback period for each of these two separate investments: Payback period (even cash flows) Investment A Investment B Cost of Investment/Annual net cash flow Cost of Investment/annual-after-tax income+ SL depreciation Payback Period