Comment on the use of the payback period

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Reference no: EM131356444

Derek has two choices for a heat-loss prevention system for the shipping doors at Kirkland Manufacturing. He can isolate the shipping department from the rest of the plant, or he can curtain off each shipping door separately. Isolation consists of building a permanent wall around the shipping area. It will cost S60 000 and will save $10 000 in heating costs per year. Plastic curtains around each shipping door will have a total cost of about S5000, but will have to be replaced about once every two years. Savings in heating costs for installing the curtains will be about S3000 per year. Use the payback period method to determine which alternative is better. Comment on the use of the payback period for making this decision.

Reference no: EM131356444

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