Olease help!! Please show work for credit. 4.5 years 10 years 2.7 years 8.2 year

Question

Olease help!! Please show work for credit.

4.5 years 10 years 2.7 years 8.2 years Friden Company has just purchased a new piece of equipment with the following characteristics: Assume straight-line depreciation and no salvage value. The payback period would be: Megna Company's net income last year was $143,000. Changes in the company's balance sheet accounts for the year appear below: The company paid a cash dividend and it did not dispose of any long-term investments or property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The following question pertain to the company's statement of cash flows.

Explanation / Answer

PAYBACK PERIOD = PURCHASE COST OF EQUIPMENT/ANNUAL COST SAVINGS

=27000/6000

4.5 YEARS

ANSWER IS OPTION - A:-4.5 YEARS

CASH FLOW FROM OPERATING ACTIVITIES

NET INCOME = 143000

LESS:INCREASE IN ACCOUNTS RECIEVABLE = (5000)

ADD:-DECREASE IN INVENTORY = 8000

LESS:-INCREASE IN PREPAID EXPENSE = (9000)

ADD:-INCREASE IN ACCOUNTS PAYABLE = 14000

ADD:-INCREASED IN ACCRUED LIABILITIES = 9000

LESS:-DECREASE IN INCOME TAXES PAYABLE = (21000)

ADD:DEPRECIATION = 58000

CASH INFLOW FROM OPERATING ACTIVITIES = 197000

CAPITAL EXPENDITURE = INCREASE IN PROPERTY PLANT & EQUIPMENT

=55000

DIVIDEND = NET INCOME - INCREASE IN RETAINED EARNINGS

=143000 - 94000

=49000

FREE CASHFLOW = CASHFLOW FROM OPERATIONS - CAPITAL EXPENDITURE - DIVIDEND

=197000-55000-49000

=$93000

ANSWER IS OPTION-D:$93000

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