A new operating system for an existing machine is expected to cost $270,000 and

Question

A new operating system for an existing machine is expected to cost $270,000 and have a useful life of five years. The system yields an incremental after-tax income of $77,884 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000

Pay back period?

A machine costs $200,000, has a $14,000 salvage value, is expected to last eight years, and will generate an after-tax income of $43,000 per year after straight-line depreciation

payback priud?

A machine costs $200,000, has a $14,000 salvage value, is expected to last eight years, and will generate an after-tax income of $43,000 per year after straight-line depreciation

payback priud?

Explanation / Answer

annual cash flow=77884+Depreciation

=$77884+52000

$129884

Payback period=270000/129884

2.09years

2)Annual cash flow=43000+23250

=$66250

Payback period=3.02YEars

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