Exercise 24-3 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 $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.

Payback period
	Choose Numerator:	/	Choose Denominator:	=	Payback period
		/		=	Payback period
a.				=
b.				=