J&M manufacturing plans on purchasing a new assembly machine for $30,000 to automate one of its current manufacturing operations. It will cost an additional $2500 to have the new machine installed. With the new machine, J&M expects to save $12,000 in annual operating and maintenance costs. The machine will last 5 years, with an expected salvage value of $5000.
(a) How long will it take to recover the investment (plus installation cost)?
(b) If J&M's interest rate is known to be 14%, determined the discounted payback period.