Birch Manufacturing Is Considering the Addition of Another Product Line

Essay

Birch manufacturing is considering the addition of another product line to its offerings.Equipment needed to produce the new line will cost $200,000.Birch estimates that the net annual cash inflows from the new product line will be as follows: Required:
a.What is the payback period for the new product line?
b.If the company can establish a steady customer base before production starts and the cash inflows will be $15,000 per year for years 1 - 15, with years 16 through 20 remaining at $2,000 annually, what will be the payback period?