Tipton Corporation has gathered the following data on a proposed investmentproject (Ignore income taxes.):Investment required in equipmentAnnual cash inflowsSalvage value of equipmentLife of the investmentRequired rate of returnO 5 yearsO 15 yearsO2 yearsO 7.143 years$ 30,000$ 6,000$0Chapter 81510The company uses straight-line depreciation on all equipment. Assume cashflows occur uniformly throughout a year except for the initial investment.The payback period for the investment is:years%

Payback period is period required to recover initial amount of investment. This is quite simple…

Tipton Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment Annual cash inflows Salvage value of equipment Life of the investment Required rate of return O 5 years 15 years $ 30,000 $ 6,000 $0 2 years 15 10 The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment is: years %

Tipton Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment Annual cash inflows Salvage value of equipment Life of the investment Required rate of return O 5 years 15 years $ 30,000 $ 6,000 $0 2 years 15 10 The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period for the investment is: years %

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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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Tipton Corporation has gathered the following data on a proposed investment
project (Ignore income taxes.):
Investment required in equipment
Annual cash inflows
Salvage value of equipment
Life of the investment
Required rate of return
O 5 years
O 15 years
O2 years
O 7.143 years
$ 30,000
$ 6,000
$0
Chapter 8
15
10
The company uses straight-line depreciation on all equipment. Assume cash
flows occur uniformly throughout a year except for the initial investment.
The payback period for the investment is:
years
%

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