Payback comparisons----Nova Products has a 5-year maximum acceptable payback period. The firm is considering the purchase of a new machine and must choose between two alternatives. The first machine requires an initial investment of

$30000 and generates annual after-tax cash inflows of $3 800 for each of the next 12 years. The second machine requires an initial investment of $36 000 and provides an annual cash inflow after taxes of $7500 for 9 years. You must MUST use at least one of the following Excel functions to answer at least one part of this question: FV, PV, PMT, RATE, NPER, NPV, AVERAGE, STDEV, and IRR.

a. Determine the payback period for each machine.

b. Comment on the acceptability of the machines, assuming that they are independent

projects.

c. Which machine should the firm accept? Why?

d. Do the machines in this problem illustrate any of the weaknesses of using payback?