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Old Equipment New Equipment $81,520 Cost $38,800 depreciation $40,400 Estimated useful life 8 years e 8 years Salvage value in 8 years $4,600 ge value $10,720 Annual cash operating costs $30,100 in 8 years $0

Old Equipment New Equipment $81,520 Cost $38,800 depreciation $40,400 Estimated useful life 8 years e 8 years Salvage value in 8 years $4,600 ge value $10,720 Annual cash operating costs $30,100 in 8 years $0

FINANCIAL ACCOUNTING
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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Splish Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Old Equipment New Equipment Cost $81,520 Cost $38,800 Accumulated depreciation $40,400 Estimated useful life 8 years Remaining life 8 years Salvage value in 8 years $4,600 Current salvage value $10,720 Annual cash operating costs $30,100 Salvage value in 8 years $0 Annual cash operating costs $35,300 Depreciation is $10,190 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600. (a) Determine the cash payback period. (Ignore income taxes.) (Round answer to 3 decimal places, e.g. 15.275.) Cash payback period years
Transcribed Image Text:Splish Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Old Equipment New Equipment Cost $81,520 Cost $38,800 Accumulated depreciation $40,400 Estimated useful life 8 years Remaining life 8 years Salvage value in 8 years $4,600 Current salvage value $10,720 Annual cash operating costs $30,100 Salvage value in 8 years $0 Annual cash operating costs $35,300 Depreciation is $10,190 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600. (a) Determine the cash payback period. (Ignore income taxes.) (Round answer to 3 decimal places, e.g. 15.275.) Cash payback period years
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