A machine can be purchased for $60,000 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.Year 1Year 2Year 3Year 4Year 5Net income$3,900$9,900$32,000$14,700$39,600Compute the machine's payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and roundpayback period answer to 3 decimal places.)YearNet IncomeDepreciationNet Cash FlowCumulative Cash Flow(60,000) $(60,000)1$3,90029,900332,000414,700539,600Payback period

Payback period refers to the time period that is required to recover the initial cost. With the help of the payback period, the management can get the break-even time also. We can get payback period by dividing initial investment with annual cash flow.Pay back period =Year before full recovery+Unrecovered cost at start of the yearCash flow during the year = 2 + ( 22,200 / 44,000 ) = 2.505 Years

Business

Accounting

A machine can be purchased for $60,000 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. Year 3 $32,000 Year 1 Year 2 Year 4 Year 5 Net income $3,900 $9,900 $14,700 $39,600 Compute the machine's payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places.) Year Net Income Depreciation Net Cash Flow Cumulative Cash Flow 2$ (60,000) $ (60,000) 1 $ 3,900 9,900 32,000 4 14,700 39,600 Payback period% =

A machine can be purchased for $60,000 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. Year 3 $32,000 Year 1 Year 2 Year 4 Year 5 Net income $3,900 $9,900 $14,700 $39,600 Compute the machine's payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places.) Year Net Income Depreciation Net Cash Flow Cumulative Cash Flow 2$ (60,000) $ (60,000) 1 $ 3,900 9,900 32,000 4 14,700 39,600 Payback period% =

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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