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Calculate the payback period for this project

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Reference no: EM132969400

Question - ABC Company would like to purchase a production machine for $900,000. The machine is expected to have a life of five years, and a salvage value of $100,000. Annual maintenance costs will total $40,000. Annual savings are predicted to be $350,000. The company only accepts projects that have a payback period of less than three years.

Required -

(1) Calculate the payback period for this project rounded to the nearest month. Show your work.

(2) Should the company accept this proposal? Explain.

Reference no: EM132969400

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