The Sheffield Company is planning to purchase $574,400 of equipment with an esti
ID: 2570279 • Letter: T
Question
The Sheffield Company is planning to purchase $574,400 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment Proiected Cash Flows $238,000 168,600 123,400 88,800 88,800 52,500 52,500 $812,600 Year 2 3 4 5 6 Total (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. Payback period (b) If Sheffield requires a payback period of three years or less, should the company make this investment? The company years and months. make this investmentExplanation / Answer
PBP Time Amount Cumulative - (574,400.00) (574,400.00) 1.00 238,000.00 (336,400.00) 2.00 168,600.00 (167,800.00) 3.00 123,400.00 (44,400.00) 4.00 88,800.00 44,400.00 5.00 88,800.00 133,200.00 6.00 52,500.00 185,700.00 7.00 52,500.00 238,200.00 PBP= 3 + 44,400/88,800 PBP= 3 + .50 Years or 3.5 Years Payback Period = 3 Years and 6 Months The company should not accept the investment as payback period of 3.5 Years is more than 3 years
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.