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?
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
Problem 1PS
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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?
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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