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The management of Deitrich Inc., a civil engineering design company, is considering an investment in a high-quality blueprint printer with the following cash flows: Year 1234567890 Investment Cash Inflow $28,000 $2,000 $4,000 $3,000 $6,000 $8,000 $9,000 $8,000 $6,000 $5,000 $4,000 $4,000 I Required: 1. Determine the payback period of the investment. 2. Would the payback period be affected if the cash inflow in the last year was several times larger?

The management of Deitrich Inc., a civil engineering design company, is considering an investment in a high-quality blueprint printer with the following cash flows: Year 1234567890 Investment Cash Inflow $28,000 $2,000 $4,000 $3,000 $6,000 $8,000 $9,000 $8,000 $6,000 $5,000 $4,000 $4,000 I Required: 1. Determine the payback period of the investment. 2. Would the payback period be affected if the cash inflow in the last year was several times larger?

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 10MC
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The management of Deitrich Inc., a civil engineering design company, is considering an investment in a high-quality blueprint printer with the following cash flows: Year 1234567890 Investment Cash Inflow $2,000 $3,000 $6,000 QUESTION 6 $28,000 $4,000 $8,000 $9,000 $8,000 $6,000 $5,000 $4,000 $4,000 I Required: 1. Determine the payback period of the investment. 2. Would the payback period be affected if the cash inflow in the last year was several times larger?
Transcribed Image Text:The management of Deitrich Inc., a civil engineering design company, is considering an investment in a high-quality blueprint printer with the following cash flows: Year 1234567890 Investment Cash Inflow $2,000 $3,000 $6,000 QUESTION 6 $28,000 $4,000 $8,000 $9,000 $8,000 $6,000 $5,000 $4,000 $4,000 I Required: 1. Determine the payback period of the investment. 2. Would the payback period be affected if the cash inflow in the last year was several times larger?
QUESTION 6 Simple Rate of Return Method The management of Stillford Micro Brew is considering the purchase of an automated bottling machine for $80,000. The machine would replace an old piece of equipment that costs $33,000 per year to operate. The new machine would cost $10,000 per year to operate. The old machine currently in use could be sold now for a scrap value of $5,000. The new machine would have a useful life of 10 years with no salvage value. Required: Compute the simple rate of return on the new automated bottling machine.
Transcribed Image Text:QUESTION 6 Simple Rate of Return Method The management of Stillford Micro Brew is considering the purchase of an automated bottling machine for $80,000. The machine would replace an old piece of equipment that costs $33,000 per year to operate. The new machine would cost $10,000 per year to operate. The old machine currently in use could be sold now for a scrap value of $5,000. The new machine would have a useful life of 10 years with no salvage value. Required: Compute the simple rate of return on the new automated bottling machine.
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