**Evaluating the Purchase of New Equipment for Nebraska Corporation**The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. Given the present value factors for $1 at compound interest of 10% for periods ranging from 1 to 5 years (0.909, 0.826, 0.751, 0.683, and 0.621, respectively), use the following financial data to determine the acceptability of this investment:| Year | Income from Operations | Net Cash Flow ||------|-------------------------|---------------|| 1 | $100,000 | $180,000 || 2 | $40,000 | $120,000 || 3 | $40,000 | $100,000 || 4 | $10,000 | $90,000 || 5 | $10,000 | $120,000 |**Question: The cash payback period for this investment is:**- a. 4 years- b. 5 years- c. 3 years- d. 2 yearsTo calculate the cash payback period, sum the net cash flows until the initial investment of $490,000 is recovered. This data will assist in determining the number of years it will take to repay the initial outlay from the cash generated by the machine. This analysis will offer an insight into the feasibility and financial sensibility of acquiring the new machine given the 10% desired rate of return.

The payback period is the time to recover the cost of investment.

The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year 1 2 3 4 5 Income from Operations $100,000 O b. 5 years O c. 3 years O d. 2 years 40,000 40,000 10,000 10,000 The cash payback period for this investment is O a. 4 years Net Cash Flow $180,000 120,000 100,000 90,000 120,000

The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year 1 2 3 4 5 Income from Operations $100,000 O b. 5 years O c. 3 years O d. 2 years 40,000 40,000 10,000 10,000 The cash payback period for this investment is O a. 4 years Net Cash Flow $180,000 120,000 100,000 90,000 120,000

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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