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What is the payback period for the new machine

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Reference no: EM132806880

Problem - Babble Brook Farm is planning to purchase a new tractor. The initial cost is $530 000. The new machine will last four years with an expected salvage value $80 000. The tractor is expected to increase the productivity of the farm. The expected increase in cash revenue each year of operating the new machine is $600 000 and expected increase cash outflows for each year is $425 000 (tax included).

Required -

1 - What is the payback period for the new machine.

2 - Calculate the new machine's ARR.

Reference no: EM132806880

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