Flexsteel Industries manufactures furniture for the retail, contract, and recreational vehicle furniture markets. The company is considering the purchase of a new piece of equipment, which would have an initial cost of $1,000,000 and a 5-year life. There is no salvage value for the equipment. The increase in cash flow each year of the equipment's life would be as follows: Year 1 Year 2 Year 3 Year 4 Year 5 $ 395,000 $ 370,000 $ 305,000 $ 250,000 $ 205,000 What is the payback period?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Flexsteel Industries manufactures furniture for the retail, contract, and recreational vehicle furniture markets. The
company is considering the purchase of a new piece of equipment, which would have an initial cost of
$1,000,000 and a 5-year life. There is no salvage value for the equipment. The increase in cash flow each year
of the equipment's life would be as follows:
Year 1
Year 2
Year 3
Year 4
Year 5
$395,000
$ 370,000
$ 305,000
$ 250,000
$ 205,000
What is the payback period?
Transcribed Image Text:. Flexsteel Industries manufactures furniture for the retail, contract, and recreational vehicle furniture markets. The company is considering the purchase of a new piece of equipment, which would have an initial cost of $1,000,000 and a 5-year life. There is no salvage value for the equipment. The increase in cash flow each year of the equipment's life would be as follows: Year 1 Year 2 Year 3 Year 4 Year 5 $395,000 $ 370,000 $ 305,000 $ 250,000 $ 205,000 What is the payback period?
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