Answer:
The operating system has payback of 3.47 years
The machine has a payback of 4.36 years
Explanation:
Payback period is the length of time taken for the initial investment to repay itself.
The project after the payback period would begin to yield returns on the investment.
Payback period=Initial investment/after-tax income per year
For the operating system the initial investment is the cost of $250,000
after-tax income is the incremental amount of $72,115
payback period=$250,000/$72,115=3.47 years
The machine has an initial capital outlay of $170,000
after tax income of $39,000
payback period=$170,000/$39,000=4.36 years
