A machine can be purchased for $150,000 and used for five years, yielding the fo

Question

A machine can be purchased for $150,000 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.

Compute the machine’s payback period (ignore taxes). (Round payback period to 3 decimal places.)

A machine can be purchased for $150,000 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.

A machine can be purchased for $150,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied, using a five-year life and a zero salvage value. Net income 5 10,000 25,000 550,000 537,500 100,000 Compute the machine's payback period (ignore taxes). (Round payback period to 3 decimal places.) Year Net Income Depreciation Net Cash Flow Cumulative Cash Flow (150,000)S 40,000 55,000 (150,000) 10.000$ 25.000 50,000 37,500 30,000 30,000 30,000 30,000 30,000 100,000 Payback period = 2.688 years

Explanation / Answer

Year Net income Depreciation Net cash flow Cumulative cash flow 0 -150000 -150000 1 10000 30000 40000 -110000 2 25000 30000 55000 -55000 3 50000 30000 80000 25000 4 5 Payback period = 2+(55000/80000)= 2.688

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