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What would be the payback period for the machine

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Question - Magtibay, Inc. is planning to acquire a new machine at a total cost of Php 360,000. The estimated life of the machine is six years with no salvage value. The straight-line method of depreciation will be used. Magtibay estimates that the annual cash flow from operations, before income taxes, from using the machine amounts to Php 90,000. Assume that Magtibay's cost of capital is 8% and the income tax rate is 40%. The present vale of P1 at 8% for 6 years is 0.630. The present value of an annuity of P1 in arrears at 8% for 6 years is 4.623.

Required -

1. What would be the payback period for the machine?

2. What would be the net present value?

Reference no: EM133157494

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