A firm is considering purchasing $22500of hand tools for use on a production lin

Question

A firm is considering purchasing $22500of hand tools for use on a production line. It is estimated thatthe tools will reduce overtime work by $2300 the first year, withthis amount increasing $1100 per year thereafter. Determine thepayback period for the hand tools. (years) Please show formulas so I understand hoe to do this problem=) A firm is considering purchasing $22500of hand tools for use on a production line. It is estimated thatthe tools will reduce overtime work by $2300 the first year, withthis amount increasing $1100 per year thereafter. Determine thepayback period for the hand tools. (years) Please show formulas so I understand hoe to do this problem=) Please show formulas so I understand hoe to do this problem=)

Explanation / Answer

No formulas are involved here. To determine the payback period youcheck to see how many years it lasts before your benefits surpassyou initial investment. Year Total benefits 1 2300 2 2300 + 2300 + 1100 = 5700 3 5700 + 2300 + 1100 +1100 = 10200 4 10200 + 2300 + 1100 + 1100 + 1100 =15800 5 15800 + 2300 + 1100 + 1100 + 1100 +1100 =22500 Thus, in 5 years your investment is paid back by the benefits from;payback period = 5 years

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