Compute the payback period for each of these two separate investments (round the payback period to two decimals):
a. A new operating system for an existing machine is expected to cost $ 520,000 and have a useful life of six years. The system yields an incremental after- tax income of $ 150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $ 10,000.
b. A machine costs $ 380,000, has a $ 20,000 salvage value, is expected to last eight years, and will generate an after- tax income of $ 60,000 per year after straight-line depreciation.

  • CreatedNovember 29, 2013
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