Exercise 11-5 Payback period computation; even cash flows LO P1 Compute the payback period for each of these two separate investments: a. A new operating system for an existing machine is expected to cost $260,000 and have a useful life of six years. The system yields an incremental after-tax income of $75,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. b. A machine costs $170,000, has a $14,000 salvage value, is expected to last ten years, and will generate an after-tax income of $41,000 per year after straight-line depreciation. Payback Period = Choose Numerator: / Choose Denominator: Cost of investment 1 Annual net cash flow $ 260,000 13 $ 170,000 1 Payback Period Payback period 0 a. b. 0