How a machine will generate an after-tax income per year

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Compute the payback period for each of these two separate investments:

a. A new operating system for an existing machine is expected to cost $260,000 and have a useful life of four years. The system yields an incremental after-tax income of $75,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000.

b. A machine costs $190,000, has a $14,000 salvage value, is expected to last seven years, and will generate an after-tax income of $41,000 per year after straight-line depreciation.

Reference no: EM13216087

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