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What is the most important concern about relying

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Question - Camel Company is considering the purchase of a new machine for use in its production process. The following information on two new machines has been collected.

Machine A Machine B

Equipment cost $900,000 $750,000

Annual Total After Tax Cash Flows:

Year 1 $284,000 $150,000

Year 2 $252,000 $185,000

Year 3 $220,000 $190,000

Year 4 $160,000 $140,000

Year 5 $117,000 $97,000

Required -

a. Calculate the payback for each machine using the information above.

b. Based on the payback method only, in which machine do you recommend Camel Co. invest? Why do you recommend this machine?

c. What is the most important concern (negative reason) about relying on the payback method to decide which machine to purchase?

Reference no: EM133108442

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