1.) A new operating system for an existing machine is expected to cost $250,000 and have a useful life of four years. The system yields an incremental after-tax income of $72,115 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. What is the payback period?
2.) A machine costs $180,000, has a $13,000 salvage value, is expected to last eleven years, and will generate an after-tax income of $39,000 per year after straight-line depreciation. What is the payback period?