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

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Accounting

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

  1. A new operating system for an existing machine is expected to cost $280,000 and have a useful life of five years. The system yields an incremental after-tax income of $80,769 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $11,000.
  2. A machine costs $170,000, has a $15,000 salvage value, is expected to last ten years, and will generate an after-tax income of $44,000 per year after straight-line depreciation.

Payback Period
Choose Numerator: / Choose Denominator: = Payback Period
Cost of investment / Annual net cash flow = Payback period
a. $280,000 / = 0
b. $170,000 /

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