Your company is considering purchasing a new bottling machine for the line that manufactures juice products. This Swill Fill 2000 is forecast to last for five years and will cost $42,000 to purchase. The new machine will offer labor savings of $4,500 annually through faster changeovers and will save you $5,000 per year in maintenance costs vs. your existing machine. The existing machine does not exhibit unusual wear-and-tear and should be able to go for another five years as well.

Your internal hurdle rate is 12%. Should you go forward with the purchase?

If we assume that the machine can outlive its useful life as stated in the problem above, what is our simple payback period? What is our discounted payback period? Please build a table to demonstrate the payback period over time at least through the point in time where the discounted payback period turns positive.