Ace Hardware is adding a new product line that will require an investment of $1,512,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $310,000 the first year, $280,000 the second year, and $260,000 each year thereafter for eight years. Compute the payback period. Round to one decimal place Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated 0 1 2 3 4 5 Now that you understand how to fill in the payback schedule, the rest has been done for you. Review the table and determine between what years the payback will occur. The payback will occur after years, but before years. Now let's calculate the amount needed to complete recovery after year 5. Amount recovered Amount needed to complete Investment - at the end of 5 years = recovery in year 6 - = Finally, calculate the payback period. (Round your answer to one decimal place.) Years recovered Amount needed to complete Net cash inflow + ( recovery in year 6 / in year 6 ) = Payback + ( / ) = The payback is ______years.
Ace Hardware is adding a new product line that will require an investment of $1,512,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $310,000 the first year, $280,000 the second year, and $260,000 each year thereafter for eight years. Compute the payback period. Round to one decimal place Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated 0 1 2 3 4 5 Now that you understand how to fill in the payback schedule, the rest has been done for you. Review the table and determine between what years the payback will occur. The payback will occur after years, but before years. Now let's calculate the amount needed to complete recovery after year 5. Amount recovered Amount needed to complete Investment - at the end of 5 years = recovery in year 6 - = Finally, calculate the payback period. (Round your answer to one decimal place.) Years recovered Amount needed to complete Net cash inflow + ( recovery in year 6 / in year 6 ) = Payback + ( / ) = The payback is ______years.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...
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Ace Hardware is adding a new product line that will require an investment of $1,512,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $310,000 the first year, $280,000 the second year, and $260,000 each year thereafter for eight years. Compute the payback period. Round to one decimal place
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Net
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Net Cash Inflows
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Year
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Amount Invested
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Annual
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Accumulated
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0
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1
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2
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3
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4
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5
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Now that you understand how to fill in the payback schedule, the rest has been done for you. Review the table and determine between what years the payback will occur.
The payback will occur after
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years, but before
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years.
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Now let's calculate the amount needed to complete recovery after year
5.
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Amount recovered
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Amount needed to complete
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Investment
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-
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at the end of 5 years
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=
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recovery in year 6
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-
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=
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Finally, calculate the payback period. (Round your answer to one decimal place.)
Years recovered
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Amount needed to complete
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Net
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|
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+ (
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recovery in year 6
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/
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in year 6
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) =
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Payback
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||
+ (
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/
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|
) =
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|
The payback is ______years.
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