Exercise 24-5 Payback period computation; even cash flows LO P1

Compute the payback period for each of these two separate investments:

1. A new operating system for an existing machine is expected to cost $290,000 and have a useful life of five years. The system yields an incremental after-tax income of $83,653 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $11,000.
2. A machine costs $180,000, has a $15,000 salvage value, is expected to last seven years, and will generate an after-tax income of $46,000 per year after straight-line depreciation.

Payback Period Choose Numerator: = Payback Period Choose 1 Denominator: 1 Annual net cash flow Cost of investment = Payback period a. = 0 b. II 0