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)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text: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
Cash Outflow
$99,000
Year
Cash Inflow
Year 1
Year 1
$40,000
40,000
29,000
Revenue
Year 2
Revenue
Year 3
Revenue
Major overhaul
Revenue
10,000
Year 3
Year 4
Year 5
Year 5
26,000
24,000
8,800
es
Revenue
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)
b. Payback period (average cash flows)
years
years
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