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Jordan 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. Jordan 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 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Year 3 Year 3 Year 4. Year 5 Year 5 Salvage value Cash Inflow Cash Outflow $89,600 $34,500 34,500 29,500 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 20,500 18,500 7,700 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decima place.) 8,900 years years

Jordan 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. Jordan 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 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Year 3 Year 3 Year 4. Year 5 Year 5 Salvage value Cash Inflow Cash Outflow $89,600 $34,500 34,500 29,500 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 20,500 18,500 7,700 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decima place.) 8,900 years years

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Jordan 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. Jordan 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 $34,500 34,500 29,500 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 20,500 18,500 7,700 Cash Outflow $89,600 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.) 8,900 years years
Transcribed Image Text:Jordan 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. Jordan 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 $34,500 34,500 29,500 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 20,500 18,500 7,700 Cash Outflow $89,600 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.) 8,900 years years
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