What is the payback period for the proposed investment

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National Radio Association, a not-for-profit organization, is considering purchasing a new enterprise  software system for $85,000. This investment is projected to have an seven-year useful life, and a salvage value of $8,000; the investment is projected to save the organization approximately $18,000 each year in operating costs. In addition to the cost of the software system, the association needs an increase of $8,000 in net working capital (other than cash) in the first year, which will not be released (that is, converted back to cash) until the end of seven years.

Required:

problem 1. What is the payback period for this proposed investment? (Assume that the cash flows, other than salvage value, occur evenly throughout the year.

Reference no: EM132794161

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