Nova products has a 44-year maximum acceptable payback period. the firm is considering the purchase of a new machine and must choose between two alternatives.
the first machine requires an initial investment of $26 comma 00026,000 and generates annual after-tax cash inflows of $6 comma 0006,000 for each of the next 1010 years.
the second machine requires an initial investment of $29 comma 00029,000 and provides an annual cash inflow after taxes of $8 comma 0008,000 for 2828 years.

a. determine the payback period for each machine.

b. comment on the acceptability of the machines, assuming that they are independent projects.

c. which machine should the firm accept? why?

d. do the machines in this problem illustrate any of the weaknesses of using payback?

Christopher kim, cfa, is a banker with batts brothers, an investment banking firm. kim follows the energy industry and has frequent contact with industry executives. kim is contacted by the ceo of a large oil and gas corporation who wants batts brothers to underwrite a secondary offering of the company's stock. the ceo offers kim the opportunity to fly on his private jet to his ranch in texas for an exotic game hunting expedition if kim's firm can complete the underwriting within 90 days. according to cfa institute standards of conduct, kim: a) may accept the offer as long as he discloses the offer to batts brothers.b) may not accept the offer because it is considered lavish entertainment.c) must obtain written consent from batts brothers before accepting the offer.