Two types of heavy construction equipment

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A construction company is considering procuring one of two types of heavy construction equipment (A and B). Each type of equipment is expected to have a 5-year useful life with zero salvage value. (A) can be purchased at a cost of $30,000, while (B) would cost $55,000.   The net cash flows for each type of equipment are given below.

Year                  A                           B

0                -$30.000             -$48,000

1                    6,000                    24,000

2                   6,000                    10,000

3                  12,000                    21,000

4                     6000                   7,000

5                    25,564                  26,610

(a) Compute the payback period for both pieces of equipment.

(b) Compute the discounted payback period, where i=8% for both pieces of equipment

Reference no: EM131263534

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