Determine the payback period for each machine

Reference no: EM13302654

GE Products has a 5-year maximum acceptable payback period. The firm is considering the purchase of a new machine and must choose between two alternative ones. The first machine requires an initial investment of $14,000 and generates annual after-tax cash inflows of $3,000 for each of the next 7 years. The second machine requires an initial investment of $21,000 and provides an annual cash inflow after taxes of $4,000 for 20 years.

a. Determine the payback period for each machine.
b. Comment on the acceptability of the machines, assuming that they are independent projects.
c. Which machine should the firm accept? Why?
d. Do the machines in the problem illustrate any of the weaknesses of using payback? Discuss.

Reference no: EM13302654

Questions Cloud

How large will your account balance be in 30 years : You make $4,800 annual deposits into a retirement account that pays 10.5 percent interest compounded monthly.

The role of ethics in business : The role of ethics in business

Find the length of time required for block to begin to slip : The circular disk shown rotates in a horizontal plane. A 3-lb block rests on the disk 8 in. from the axis of rotation. find the length of time required for the block to begin to slip

Determine what is the present worth of benefit : A flood control project has a construction cost during the first year of $10 million, during the second year $6 million, and during the third year $2 million. It is completed at the end of the third year and thereafter incurs an annual operating c..

Determine the payback period for each machine : The second machine requires an initial investment of $21,000 and provides an annual cash inflow after taxes of $4,000 for 20 years.

Evaluate the risk of each proposed project and rank : Evaluate the risk of each proposed project and rank it "low," "medium," or "high."

Compare and contrast online brokerage to dips and drips : Search the Web for three companies (look for investor information) that offer DIPs or DRIPs and compare and contrast the requirements, including minimum investments, nature of the return, costs, and other features.

What is the radius of gyration of the tire : To determine the radius of gyration of a tire, an engineer lets the tire roll down an inclined surface. what is the radius of gyration of the tire

How to solve for the deficit concentration as function of x : Develop the mass balance equation and solve for the deficit concentration as a function of x, u, Lo, Do, ka, kd,and ks in the stream. Lo ans Do are the initial concentrations of BOD and DO deficit in the stream at x

User Account

All Pages