A machine can be purchased for $220,000 and used for five years, yielding the fo

Question

A machine can be purchased for $220,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied, using a five-year life and a zero salvage value. Net $14,900 $36,900 $99, 000 $55,700 $147,600 income Compute the machine's payback period (ignore taxes) (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places Year Net Income Depreciation Net Cash Flow Cumulative Cash Flow (220,000)$ (220,000) 1 S14,900 36,900 9,000 55,700 147,600 Payback period

Explanation / Answer

Year Net income Depreciation Net cash flow Cumulative cash flow 0 -220000 -220000 1 14900 44000 58900 -161100 2 36900 44000 80900 -80200 3 99000 44000 143000 62800 4 55700 44000 99700 162500 5 147600 44000 191600 354100 Payback period = 2+(80200/143000)= 2.561 years

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