A machine costs $5240 and produces benefits of $1000 at the end of each year for 8 years. Assume an annual interest rate of 10%. (a) What is the payback period (in years)? (b) What is the breakeven point (in years)? (c) Since the answers in (a) and (b) are different, which one is “correct”?

A machine costs $5240 and produces benefits of $1000 at the end of each year for 8 years. Assume an annual interest rate of 10%. (a) What is the payback period (in years)? (b) What is the breakeven point (in years)? (c) Since the answers in (a) and (b) are different, which one is “correct”?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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