Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift.would be leased onan annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie wouldsell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow:Nature of ItemPurchase priceCash Outflow$99,000YearCash InflowYear 1Year 1$40,00040,00029,000RevenueYear 2RevenueYear 3RevenueMajor overhaulRevenue10,000Year 3Year 4Year 5Year 526,00024,0008,800esRevenueSalvage valueRequireda.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimalplace.)a. Payback period (accumulated cash flows)b. Payback period (average cash flows)yearsyears

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Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift.would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Nature of Item Purchase price Revenue Cash Outflow $99,000 Year Cash Inflow Year 1 Year $40,000 40,000 29,000 Year Revenue Year 3 Revenue 10,000 Year 3 Year 4 Year 5 Year 5 Major overhaul Revenue Revenue 26,000 24,000 8,800 Salvage value Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.) a. Payback period (accumulated cash flows) years years b. Payback period (average cash flows)

Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift.would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Nature of Item Purchase price Revenue Cash Outflow $99,000 Year Cash Inflow Year 1 Year $40,000 40,000 29,000 Year Revenue Year 3 Revenue 10,000 Year 3 Year 4 Year 5 Year 5 Major overhaul Revenue Revenue 26,000 24,000 8,800 Salvage value Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.) a. Payback period (accumulated cash flows) years years b. Payback period (average cash flows)

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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Solomon Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Solomon would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Year 1 Year 2 Year 3 Year 3 Year 4 Year 5 Year 5 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Salvage value Cash Inflow $37,000 37,000 26,000 23,000 21,000 8,200 Cash Outflow $90,600 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 9,400 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. Note: Round your answers to 1 decimal place. years years
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Subject: accounting