A machine can be purchased for $248,000 and used for five years, yielding the fo

Question

A machine can be purchased for $248,000 and used for five years, yielding the following net incomes. In projecting net incomes double-declining depreciation is applied, using a five-year life and a zero salvage value Year2 $25,000 Year3 $73,000 $57,500 Year 1 Year 4 Year 5 Net income $16,000 $111, 000 Compute the machine's payback period (ignore taxes). (Round payback period answer to 3 decimal places.) Computation of Annual Depreciation Expense Annual Depr(40% Beginning Year Book Value Accumulated Ending Book Value of Book Value)Depreciation at Year-End 4 Annual Cash Flows Cumulative Cash Flow S (248,000) Year Net income Depreciation Net Cash Flow 0 S (248,000) 16,000 25,000 73,000 57,500 111,000 73,000 57,500 111,000 73,000 130,500 241,500 3 4 Payback period- years

Explanation / Answer

Computation of Annual Depreciation Expense Year Beginning Book Value Annual Depr. (40 % of Book Value) Accumulated Depreciation at year End Ending Book Value 1               248,000 99,200 99,200            148,800 2               148,800 59,520 158,720 89,280 3                 89,280 35,712 194,432 53,568 4                 53,568 1,427 215,859 32,141 5                 32,141 32,141 248,000 -   Annual Cash flows Year Net income Depreciation Net cash Flow Cumulative Cash flow 0 (248,000) (248,000)          (248,000) 1                 16,000 99,200 115,200          (132,800) 2                 25,000 59,520 84,520            (48,280) 3                 73,000 35,712 108,712 60,432 4                 57,500 21,427 78,927            139,359 5               111,000 32,141 143,141            282,500 Payback Period = 2.444 Years Payback Period = 2 years + (48,280/108,712) = 2.444 Years

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.