An engineering department is considering purchase of an advanced computational f

Question

An engineering department is considering purchase of an advanced computational fluid dynamics software system to enhance productivity. the initial cost of the software is $55,000 but is expected to result in efficiency savings of $25,000 the first year, with this amount decreasing by $5000 per year thereafter. the payback period for the software is equal to______years. *Please explain how you got an answer and anyone who just puts an answer with no explanation will not recieve any stars.-thankyou

Explanation / Answer

Calculating payback period requires no time-value of money calculations.

Soooo (yr.1)$25,000+(yr.2)$20,000+(yr.2.67)$10,050=$55,050 which is about the cost of the software. 2.67 years is your answer.

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