Question
Vandezande Inc. is considering the acquisition of a new machine that costs $429,000 and has a useful life of 5 years with no salvage value.
Vandezande Inc. is considering the acquisition of a new machine that costs $429,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.):
| Incremental Net Operating Income | Incremental Net Cash Flows | |||||
| Year 1 | $ | 70,000 | $ | 152,000 | ||
| Year 2 | $ | 76,000 | $ | 155,000 | ||
| Year 3 | $ | 87,000 | $ | 165,000 | ||
| Year 4 | $ | 50,000 | $ | 152,000 | ||
| Year 5 | $ | 92,000 | $ | 154,000 | ||
Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period of this investment is closest to:
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