Calculate the payback period for the proposed investment

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Problem - Payback period; net present value; even cash flows: bank - The management of Ballarat National Bank is considering an investment in automatic teller machines. The machines would cost $513 000 each and have a useful life of seven years. The bank's finance manager has estimated that the automatic teller machines will save the bank $110 000 per machine during each year of their life. The machines will have no salvage value. Ignore company income taxes.

Required -

1. Calculate the payback period for the proposed investment.

2. Calculate the net present value of the proposed investment, assuming a discount rate of:

(a) 8 per cent.

(b) 10 per cent.

(c) 12 per cent:

3. What can you conclude 'From Your answers to requirements 1 and 2 about the limitations of the payback method?

Reference no: EM132995292

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