Ayayai Growth Farms, a farming cooperative, is considering purchasing a tractor for $551,600. The machine has a 10-year life and an estimated salvage value of $37,000. Delivery costs and set-up charges will be $12,200 and $400, respectively. Ayayai Growth uses straight-line depreciation and has a required rate of return of 9%. Ayayai Growth estimates that the tractor will be used five times a week with the average charge to the individual farmers of $400. Fuel is $50 for each use of the tractor. The present value of an annuity of 1 for 10 years at 9% is 6.41766. Click here to view PV tables. For the new tractor, compute the: (a) Cash payback period. (Round answer to 1 decimal places, e.g. 15.2.) Cash payback period years
Ayayai Growth Farms, a farming cooperative, is considering purchasing a tractor for $551,600. The machine has a 10-year life and an estimated salvage value of $37,000. Delivery costs and set-up charges will be $12,200 and $400, respectively. Ayayai Growth uses straight-line depreciation and has a required rate of return of 9%. Ayayai Growth estimates that the tractor will be used five times a week with the average charge to the individual farmers of $400. Fuel is $50 for each use of the tractor. The present value of an annuity of 1 for 10 years at 9% is 6.41766. Click here to view PV tables. For the new tractor, compute the: (a) Cash payback period. (Round answer to 1 decimal places, e.g. 15.2.) Cash payback period years
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ayayai Growth Farms, a farming cooperative, is considering purchasing a
tractor for $551,600. The machine has a 10-year life and an estimated
salvage value of $37,000. Delivery costs and set-up charges will be
$12,200 and $400, respectively. Ayayai Growth uses straight-line
depreciation and has a required rate of return of 9%.
Ayayai Growth estimates that the tractor will be used five times a week
with the average charge to the individual farmers of $400. Fuel is $50 for
each use of the tractor. The present value of an annuity of 1 for 10 years at
9% is 6.41766.
Click here to view PV tables.
For the new tractor, compute the:
(a)
Cash payback period. (Round answer to 1 decimal places, e.g.
15.2.)
Cash payback period
years
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