Nelson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $105,000. The equipment will have an initial cost of $420,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $80,000, what is the payback period? Ignore income taxes. Multiple Choice 3.24 years 4.00 years

Nelson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $105,000. The equipment will have an initial cost of $420,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $80,000, what is the payback period? Ignore income taxes. Multiple Choice 3.24 years 4.00 years

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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QUESTION 4 Max Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $58540. The equipment will have an initial cost of $190150 and have a 5-year life. The salvage value of the equipment is estimated to be $23100. Factors to use for n=5, 1=10% (DO NOT USE ANY OTHER FACTORS OR EQUATIONS) Present Value of an Annuity of $1 Present Value of $1 3.7908 0.6209 6.1051 1.6105 Future Value of an Annuity of $1 Future Value of $1 If the hurdle rate is 10%, what is the approximate net present value? Ignore income taxes.
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7. What is the payback period? ?