Able Plastics Injection Molding Firm

Able Plastics, an injection-molding firm, has negotiated a contract with a national chain of department stores. Plastic pencil boxes are to be produced for a 2-year period. Able Plastics has never produced the item before and, therefore, requires all new dies. If the firm invests $67,000 for special removal equipment to unload the completed pencil boxes from’ the molding machine, one machine operator can be eliminated. This would save $26,000 per year. The removal equipment has no salvage value and is not expected to be used after the 2-year production contract is completed. The equipment, although useless, would be serviceable for about 15 years. You have been asked to do a payback period analysis on whether to purchase the special removal equipment. What is the payback period? Should Able Plastics buy the removal equipment?

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