Samson Ltd is considering replacing equipment. The cost on 1.1.2023 will be £3m. The expected economic life of the equipment will be 4 years. The company depreciates its equipment using the straight-line methods. The company expects to sell this equipment for £400,000, after the end of its useful economic life. There are expected cost savings arising from this investment of £1,200,000 in each of years 1 and 2 and £800,000 in each of years 3 and 4. What is the payback of this investment? Select one answer: O 3 years and 2 months 0 2 years O 2 years and 9 months O 3 years Reset

Samson Ltd is considering replacing equipment. The cost on 1.1.2023 will be £3m. The expected economic life of the equipment will be 4 years. The company depreciates its equipment using the straight-line methods. The company expects to sell this equipment for £400,000, after the end of its useful economic life. There are expected cost savings arising from this investment of £1,200,000 in each of years 1 and 2 and £800,000 in each of years 3 and 4. What is the payback of this investment? Select one answer: O 3 years and 2 months 0 2 years O 2 years and 9 months O 3 years Reset

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: What is the difference between ER and REA model

A: ER model stands for Entity Relationship model which is a high-level data model. This model defines…

Q: What does "FMS option" imply exactly?

A: The term "US government program" refers to any initiative, policy, or project implemented by the…

Q: What exactly are ESOPs? What are some of its benefits and drawbacks?

A: Introduction: ESOP: Employee stock ownership plan is retirement plans for employees of the company…

Q: What is the going concern assumption?

A: Going concern Assumption: On the basis of Going concern assumption Financial statements are…

Q: What assumptions underlie the EOQ model?

A: The model that helps in calculating the optimal amount of quantity needs to be purchase for…

Q: What is differential analysis?

A: Differential analysis: An analysis which only considers changes in income and expenses of an entity…

Q: Why is the NPV preferred over the IRR?

A: Net Present Value is a method of finding the profitability of a project by discounting future cash…

Q: What is the big bang approach?

Q: Do you think the Ricardian Equivalence is realistic?

A: Ricardian equivalence theory : In simple words, Ricardian equivalence can be understood as an…

Q: Newly formed S&J Iron Corporation has 121,000 shares of $6 par common stock authorized. On March…

A: b. Calculate the amount of common stock on December 31, year 1.

Q: When is independence required?

Q: What is a constraint?

A: Internal Control: It refers to a set of rules, policies adopted by a business to ensure accuracy…

Q: What are the Differences in Maturities?

A: Maturities in the context of the bond mean that bonds are issued for a specific period of time. It…

Q: What are the key assumptions of the CAPM?

A: Introduction: The CAPM is an equilibrium model that stipulates the relationship between necessary…

Q: What assumptions are inherent in the EOQ model as presentedhere?

A: Economic order quantity (EOQ): Economic ordering quantity (EOQ) is the perfect order quantity a…

Q: What are the assumptions and criticisms of Gordon’s model?

A: Gordon's model, also known as the Gordon Growth Model, is a widely used method for valuing stocks.…

Q: What are the CVP assumptions?

Q: What is counterbalancing?

A: Errors: The comparability and consistency of the financial statements decreases when a company…

Q: What is sensitive analysis?

A: Sensitive analysis is a method for predicting the outcome of a decision if a situation turns…

Q: What is the relevant range?

A: The concept of relevant range is used in the cost accounting. It tells under what level of…

Q: What are the assumptions of Walter’s model?

A: The Walter Model of Careers is an influential theory in the field of career development. This model…

Q: In what ways is this true or untrue?

A: Asset is anything which is owned and controlled by the entity which will provide the future economic…

Q: Why is EBITDA controversial?

A: Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a metric used to assess…

Q: The Adam Corporation had the following transactions during the year: Jan. 15 Purchased 1,500 shares…

A: Date Particulars Debit Amount Credit Amount Jan 15 Equity share of LMN stock a/c…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Which is correct ?

Samson Ltd is considering replacing equipment. The cost on 1.1.2023 will be £3m. The expected economic life of
the equipment will be 4 years. The company depreciates its equipment using the straight-line methods. The
company expects to sell this equipment for £400,000, after the end of its useful economic life. There are expected
cost savings arising from this investment of £1,200,000 in each of years 1 and 2 and £800,000 in each of years 3
and 4.
What is the payback of this investment?
Select one answer:
3 years and 2 months
O2 years
O 2 years and 9 months
O 3 years
Reset

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Payback Period

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

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

How suboptimization can occur?
What differential analysis and why would we use it?
A1 fx Chapter 9: Applying Excel A В E F G H 1 Chapter 9: Applying Excel 2 3 Data 4 Revenue 5 Cost of ingredients 6 Wages and salaries 7 Utilities 8 Rent $16.00 q $6.50 q $10,000 $800 $0.20 q + $2,200 $600 9 Miscellaneous $0.80 q + 10 11 Actual results: 12 Revenue $27,920 $11,110 13 Cost of ingredients 14 Wages and salaries $10,130 $1,080 $2,200 15 Utilities 16 Rent 17 Miscellaneous $2,240 18 19 Planning budget activity 20 Actual activity 1,800 meals served 1.700 meals served 21 22 Enter a formula into each of the cells marked with a ? below 23 Review Problem: Variance Analysis Using a Flexible Budget 24 25 Construct a flexible budget performance report 26 Revenue 27 and Actual Activity Planning Budget 1,800 $ 28,800 28 Spending Variances Flexible Results Вudget 1,700 $ 27,200 $ 29 Variances 30 Meals served 1,700 31 Revenue 32 Expenses: Cost of ingredients Wages and salaries $27,920 $ 720 F 1,600 U $11,110 $10,130 $1,080 $2,200 $2,240 $26,760 $1,160 $ 11,050 $10,000 33 60 U 650 F 11,700…
What do we mean by a lump-sum Problem?
What are the types of fundamental analysis?
What is CAPM? What is ‘Alpha’ and ‘Beta’ in CAPM?