Another: ARR \& Payback... - A new operating system for a machine is expected to cost $520,000 and have a useful life of six year. It yields after-tax income of $150,000 each year after straight line depreciation. Salvage value is $10,000. - Cost of investment/annual net cash flow = Payback - Annual after-tax net income/Avg investment = ARR Compare to the following: - A machine costs $380,000, with a salvage of $20,000 and useful life of 8 years. It will generate an after-tax income of $60,000 per year after straight line depreciation. - Cost of investment/annual net cash flow = payback - Annual after-tax net income/Avg investment = ARR - Now compare this to previous. Another: ARR \& Payback... - A new operating system for a machine is expected to cost $520,000 and have a useful life of six year. It yields after-tax income of $150,000 each year after straight line depreciation. Salvage value is $10,000. - Cost of investment/annual net cash flow = Payback - Annual after-tax net income/Avg investment = ARR Compare to the following: - A machine costs $380,000, with a salvage of $20,000 and useful life of 8 years. It will generate an after-tax income of $60,000 per year after straight line depreciation. - Cost of investment/annual net cash flow = payback - Annual after-tax net income/Avg investment = ARR - Now compare this to previous