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. =