Homework Help is Here – Start Your Trial Now!
Business
Finance
Calculate the project's cash payback period. (Round answer to 2 decimal places, eg. 15.25) Cash payback period 3.6 years

Calculate the project's cash payback period. (Round answer to 2 decimal places, eg. 15.25) Cash payback period 3.6 years

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question

want the full pic of correct answer 

Tamarisk Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $130,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on astraight-line basis. Currently, the market value of the old equipment is $44,100. The new equipment can be bought for $172,580, including installation. Over its 10-year life, it will reduce operating expenses from $190,100 to $146,400 for the first six years, and from $201,500 to $193,000 for the last four years. Net working capital requirements will also increase by $20,100 at the time of replacement. It is estimated that the company can sell the new equipment for $24,700 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years. Click here to view the factor table.
Transcribed Image Text:Tamarisk Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $130,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on astraight-line basis. Currently, the market value of the old equipment is $44,100. The new equipment can be bought for $172,580, including installation. Over its 10-year life, it will reduce operating expenses from $190,100 to $146,400 for the first six years, and from $201,500 to $193,000 for the last four years. Net working capital requirements will also increase by $20,100 at the time of replacement. It is estimated that the company can sell the new equipment for $24,700 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years. Click here to view the factor table.
X Your answer is incorrect. Calculate the project's cash payback period. (Round answer to 2 decimal places, eg. 15.25.) Cash payback period 3.6 years
Transcribed Image Text:X Your answer is incorrect. Calculate the project's cash payback period. (Round answer to 2 decimal places, eg. 15.25.) Cash payback period 3.6 years
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Database management system (DBMS)
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS