Vandezande Inc. is considering the acquisition of a new machine that costs $467,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.): Incremental Net Operating Income Incremental Net Cash Flows Year 1 $ 75,000 $ 152,000 Year 2 $ 81,000 $ 160,000 Year 3 $ 92,000 $ 175,000 Year 4 $ 55,000 $ 157,000 Year 5 $ 97,000 $ 159,000 Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period of this investment is closest to: (Round your answer to 1 decimal place.)
Vandezande Inc. is considering the acquisition of a new machine that costs $467,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.): Incremental Net Operating Income Incremental Net Cash Flows Year 1 $ 75,000 $ 152,000 Year 2 $ 81,000 $ 160,000 Year 3 $ 92,000 $ 175,000 Year 4 $ 55,000 $ 157,000 Year 5 $ 97,000 $ 159,000 Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period of this investment is closest to: (Round your answer to 1 decimal place.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vandezande Inc. is considering the acquisition of a new machine that costs $467,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net
| Incremental Net Operating Income | Incremental Net Cash Flows | |||||
| Year 1 | $ | 75,000 | $ | 152,000 | ||
| Year 2 | $ | 81,000 | $ | 160,000 | ||
| Year 3 | $ | 92,000 | $ | 175,000 | ||
| Year 4 | $ | 55,000 | $ | 157,000 | ||
| Year 5 | $ | 97,000 | $ | 159,000 | ||
Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period of this investment is closest to: (Round your answer to 1 decimal place.)
Expert Solution
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Payback is a capital budgeting tool which is used to find the time required to recover the invested cost in an project.
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