Tharun (sd) (95 Points)
19 June 2013I have a product X.
Its a machine which is a part of series of process.
Now existing machine can process 50000 unit per month.
when I buy a new machine it can process 100000.
how to compute the benefit & payback period of the new machine.
the cost of operation of both machine are almost same.
no sale takes place after this process it just moves to next process.
Thanks in advance
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 June 2013
For getting the payback period you need to know the cost of the machine and the cash inflows that it will be able to generate in the future period. Then divide the Cost with the cash inflows and you will get the payback period.
For calculating the benefit you need to calculate the Equivalent annual cost of the both the machines by using the discount factor whihc would be the interst rate.
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