A machine can be purchased for $230,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $46,000. Year 2 Year 3 Year 4 $38,600 $106,000 $58,300 Year 5. $154,400 Compute the machine's payback period. (Round payback period answer to 2 decimal places.) Income Year 1 $15,600 Year Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 $ Answer is complete but not entirely correct. Net Cash Flow Net Income 15,600 38,600 106,000 58,300 154,400 Depreciation $ 46,000 46,000 46,000 46,000 46,000 $ (230,000) 61,600 82,600 Payback period= $ Cumulative Net Cash Flow (230,000) (168,400) 85,800 X 66,200 x 2.56 years
A machine can be purchased for $230,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $46,000. Year 2 Year 3 Year 4 $38,600 $106,000 $58,300 Year 5. $154,400 Compute the machine's payback period. (Round payback period answer to 2 decimal places.) Income Year 1 $15,600 Year Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 $ Answer is complete but not entirely correct. Net Cash Flow Net Income 15,600 38,600 106,000 58,300 154,400 Depreciation $ 46,000 46,000 46,000 46,000 46,000 $ (230,000) 61,600 82,600 Payback period= $ Cumulative Net Cash Flow (230,000) (168,400) 85,800 X 66,200 x 2.56 years
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:A machine can be purchased for $230,000 and used for five years, yielding the following income. This income computation includes
annual depreciation expense of $46,000.
Year 1
Year 2
Year 3
Year 4
$38,600 $106,000 $58,300
Year 5
$154,400
$15,600
Compute the machine's payback period. (Round payback period answer to 2 decimal places.)
Income
Year
Initial invest
Year 1
Year 2
Year 3
Year 4
Year 5
$
Answer is complete but not entirely correct.
Net Cash
Flow
Net
Income
15,600
38,600
106,000
58,300
154,400
Depreciation
$
46,000
46,000
46,000
46,000
46,000
$ (230,000)
61,600
82,600 X
Payback period=
Cumulative Net
Cash Flow
(230,000)
(168,400)
85,800
66,200 x
2.56 years
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