Solution-What is its expected payback period

What is its expected payback period

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Reference no: EM132534305

Question - Heartland Paper Company is considering the purchase of a new high-speed cutting machine. Two cutting machine manufacturers have approached Heartland with proposals: (1) Toledo Tools and (2) Akron Industries. Regardless of which vendor Heartland chooses, the following incremental cash flows are expected to be realized.

Year	Incremental Cash Inflows	Incremental Cash Outflows
1	$27,000	$22,000
2	$28,000	$23,000
3	$33,000	$28,000
4	$36,000	$31,000
5	$35,000	$30,000
6	$34,000	$29,000

Required -

a. If the machine manufactured by Toledo Tools costs $30,000, what is its expected payback period?

b. If the machine manufactured by Akron Industries has a payback period of 60 months, what is its cost?

c. Which of the machines is most attractive based on its respective payback period?

Reference no: EM132534305

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What is its expected payback period

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