You have the opportunity to expand your business by purchasing new equipment for $152,000.

The equipment has a useful life of 9 years. You expect to incur cash fixed costs of $79,000 per year to use this new equipment, and you expect to incur cash variable costs in the amount of 5% of annual revenues. Your cost of capital is 6%.

Requirements

1.	Calculate the payback period and the discounted payback period for this investment, assuming you will generate $150,000 in cash revenues every year.
2.	Assume instead you expect a cash revenue stream for this investment. Based on this estimated revenue stream, What are the payback and discounted payback periods for this investment?