Exercise 24-5 Payback period computation; even cash flows LO P1

Exercise 24-5 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.