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14Carrott Price Company is considering purchasing a new machine in order to expand their business. The...

14Carrott Price Company is considering purchasing a new machine in order to expand their business. The information Carrott Price has accumulated regarding the new machine is:

Cost of the machine

$90,000

Increased annual contribution margin

$19,500

Life of the machine

9 years

Required rate of return

12%

Carrott Price estimates they will be able to produce more product using the second machine and thus increase their annual contribution margin. They also estimate there will be a small disposal value of the machine but the cost of removal will offset that value. Ignore income tax issues in your answers, unless it is specified. Assume all cash flows occur at year-end except for initial investment amounts.

What is the discounted payback time for this investment?

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