Compute the payback period for each of these two separate investments (round the payback period to two decimals). 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.
Compute the payback period for each of these two separate investments (round the payback period to two decimals). 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Compute the payback period for each of these two separate investments (round the payback period to two
decimals).
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
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.
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