Extra cost of Machine B = 67,000-48,000 = $19000 | ||
Year | Incremental Cash flows | Cumulative Cash flows |
0 | -19000 | -19000 |
1 | -1000 | -20000 |
2 | 4000 | -16000 |
3 | 5000 | -11000 |
4 | 5000 | -6000 |
5 | 3000 | -3000 |
6 | 3000 | 0 |
7 | 2000 | 2000 |
Hence, payback period = 6 years | ||
i.e. E |
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