Branch Brothers is considering the purchase of a machine that will cost $37,800. The company estimates the machine will generate the following cost savings and terminal value:
Cost Terminal
Year Savings Value
1 $10,800 --
2 9,000 --
3 5,600 --
4 4,800 --
5 4,200 --
6 4,000 --
7 2,100 $800
Compute the payback period, ignoring income taxes.

Question

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The Answer of Branch Brothers is considering the purchase of a machine that will cost $37,800. The company estimates the machine will generate the following cost savings and terminal value:
Cost Terminal
Year Savings Value
1 $10,800 --
2 9,000 --
3 5,600 --
4 4,800 --
5 4,200 --
6 4,000 --
7 2,100 $800
Compute the payback period, ignoring income taxes.

Branch Brothers Is Considering the Purchase of a Machine That