J&M Manufacturing plans on purchasing a new assembly machine for $32,000 to automate one of its current manufacturing operations. It will cost an additional $3,500 to have the new machine installed. With the newmachine, J&M expects to save $12,000 in annual operating and maintenance costs. The machine will last five years with an expected salvage value of $5,000.(a) How long will it take to recover the investment (plus installation cost)?(b) If J&M's interest rate is known to be 17%, determine the discounted payback period.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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J&M Manufacturing plans on purchasing a new assembly machine for $32,000 to automate one of its current manufacturing operations. It will cost an additional $3,500 to have the new machine installed. With the new
machine, J&M expects to save $12,000 in annual operating and maintenance costs. The machine will last five years with an expected salvage value of $5,000.
(a) How long will it take to recover the investment (plus installation cost)?
(b) If J&M's interest rate is known to be 17%, determine the discounted payback period.

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