A mixing process for laboratory-grade sodium phosphate has an estimated first cost of $320,000 with annual costs of $40,000. Income is expected to be $98,000 per year. At a MARR of 20% per year, the payback period is closest to: (choose one)
(a) 3 years
(b) 15 years
(c) 19 years
(d ) It will never pay off
-320,000 + (98,000-40,000)(P/A,20%,np) = 0
(P/A,20%,np) = 5.5172
There is no P/A factor this large for any n value, that is, n ? ?. From observation, the net income of $58,000 per year < $64,000 interest per year; the investment will never pay off.
Answer is (d) It will never pay off
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