Pacific Green Company Is Considering Buying a Unique Bar-Coding Machine

Pacific Green Company is considering buying a unique bar-coding machine to help them track their plant inventory.They are using the payback period and accounting rate of return methods to evaluate the purchase.They will consider the project further if the payback period is less than four years and it has a minimum accounting rate of return of 7%.Relevant information on the machine is as follows:Acquisition cost = $48,000
Expected salvage value = $0
Expected annual cash inflow benefits = $13,000 per year for 5 years
Expected useful life = 5 yearsRequired:
Compute the payback period and ARR.Advise GPC on their appropriate action.

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Payback period = $48,000/$13,0...

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