A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computationincludes annual depreciation expense of $10,000.IncomeYearYear 1$3,300Initial investYear 1Year 2Year 3Year 4Year 5Year 2$8,300Compute the machine's payback period.Note: Round payback period answer to 2 decimal places.Net Income Depreciation3,3008,30030,00012,40033,200Year 3$30,000Year 4$12,400Net Cash Flow$(50,000) $Payback period=Year 5$33,200Cumulative Net CashFlow(50,000)00

The question is related to Capital Budgeting. Payback Period is the length of time required to…

A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $10,000. Income Year Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 $3,300 Compute the machine's payback period. Note: Round payback period answer to 2 decimal places. Net Income $ Year 2 $8,300 3,300 8,300 30,000 12,400 33,200 Year 3 $30,000 Depreciation Year 4 $12,400 Net Cash Flow $ (50,000) $ Payback period = Year 5 $33,200 Cumulative Net Cash Flow (50,000) 0 0

A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $10,000. Income Year Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 $3,300 Compute the machine's payback period. Note: Round payback period answer to 2 decimal places. Net Income $ Year 2 $8,300 3,300 8,300 30,000 12,400 33,200 Year 3 $30,000 Depreciation Year 4 $12,400 Net Cash Flow $ (50,000) $ Payback period = Year 5 $33,200 Cumulative Net Cash Flow (50,000) 0 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computation
includes annual depreciation expense of $10,000.
Income
Year
Year 1
$3,300
Initial invest
Year 1
Year 2
Year 3
Year 4
Year 5
Year 2
$8,300
Compute the machine's payback period.
Note: Round payback period answer to 2 decimal places.
Net Income Depreciation
3,300
8,300
30,000
12,400
33,200
Year 3
$30,000
Year 4
$12,400
Net Cash Flow
$
(50,000) $
Payback period
=
Year 5
$33,200
Cumulative Net Cash
Flow
(50,000)
0
0

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