Following is a table that shows the expected cash flows of a machine that QQQ Inc. is currently evaluating for possible purchase. Both the expected annual cash flows and the present value of the cash flows are shown in the table. Year Expected cash Present value of the cash flow using the flow Firm's required rate of return $(10,000) 0 $(10,000) 1 $6,000 $5,455 2 $3,000 $2,479 3 $1,000 $751 4 $5,000 $3,415 Compute the traditional payback period and the discounted payback period.
Following is a table that shows the expected cash flows of a machine that QQQ Inc. is currently evaluating for possible purchase. Both the expected annual cash flows and the present value of the cash flows are shown in the table. Year Expected cash Present value of the cash flow using the flow Firm's required rate of return $(10,000) 0 $(10,000) 1 $6,000 $5,455 2 $3,000 $2,479 3 $1,000 $751 4 $5,000 $3,415 Compute the traditional payback period and the discounted payback period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Following is a table that shows the expected cash flows of a machine
that QQQ Inc. is currently evaluating for possible purchase. Both the
expected annual cash flows and the present value of the cash flows
are shown in the table.
Year
Expected cash Present value of the cash flow using the
flow
Firm's required rate of return
$(10,000)
0
$(10,000)
1
$6,000
$5,455
2
$3,000
$2,479
3
$1,000
$751
4
$5,000
$3,415
Compute the traditional payback period and the discounted payback
period.
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