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Walton is considering the purchase of a new machine for use in its production process. The following information on two new machines are provided.
Walton is considering the purchase of a new machine for use in its production process. The following information on two new machines are provided. # Equipment cost Annual Total After Tax Cash Flows: Year 1 Machine B Machine A $900,000 $750,000 Year 2 Year 3 Year 4 $284,000 $150,000 $252,000 $185,000 $220,000 $190,000 $160,000 $140,000 $117,000 $97,000 Year 5 a. Calculate the payback for each machine using the information above. b. Based on the payback method only, in which machine do you recommend Walton invest? Why do you recommend this machine? c. What is the most important concern (negative reason) about relying on the payback method to decide which machine to purchase?
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