If a copy center is considering the purchase of a new copy machine with an initial investment cost of $145,800 and the center expects an annual net cash flow of $18,000 per year, what is the payback period?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
If a copy center is considering the purchase of a new copy machine with an initial investment cost of $145,800 and the center expects an annual net cash flow of $18,000 per year,
what is the payback period?
years
Transcribed Image Text:If a copy center is considering the purchase of a new copy machine with an initial investment cost of $145,800 and the center expects an annual net cash flow of $18,000 per year, what is the payback period? years
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value.
Project X
Project Y
Initial investment
$254,499
$181,089
Net cash flows anticipated:
Year 1
82,000
35,000
Year 2
60,000
56,000
Year 3
91,000
72,000
Year 4
81,000
68,000
76,000
27,000
Year 5
A. Compute the IRR for both projects using the IRR spreadsheet function.
%
Project X
Project Y
B. Which project should be recommended.
Transcribed Image Text:Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y Initial investment $254,499 $181,089 Net cash flows anticipated: Year 1 82,000 35,000 Year 2 60,000 56,000 Year 3 91,000 72,000 Year 4 81,000 68,000 76,000 27,000 Year 5 A. Compute the IRR for both projects using the IRR spreadsheet function. % Project X Project Y B. Which project should be recommended.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Strategic business units
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education