Payback period: Capital budgeting is a planning process used to know whether a long term investment or options like to keep the old machine will be profitable or not involving factors like present value factors. There are many capital budgeting techniques. The technique that will be discussed here is – Payback period of the investment Payback period – Payback period of the investment is calculated as under – P a y b a c k p e r i o d = I n i t i a l I n v e s t m e n t – S a l v a g e v a l u e o f o l d e q u i p m e n t A n n u a l n e t c a s h i n f l o w Break-even time or discounted payback period: The break-even time is discounted payback period. When payback period concept includes the concept of present value, it is termed as break-even time. Requirement 1 To compute: • Payback period • Break-even time

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Answer 1

Question

Chapter 25, Problem 27E

To determine

Concept Introduction:

Payback period:

Capital budgeting is a planning process used to know whether a long term investment or options like to keep the old machine will be profitable or not involving factors like present value factors.

There are many capital budgeting techniques. The technique that will be discussed here is –

Payback period of the investment

Payback period –

Payback period of the investment is calculated as under –

$P a y b a c k p e r i o d = \frac{I n i t i a l I n v e s t m e n t - S a l v a g e v a l u e o f o l d e q u i p m e n t}{A n n u a l n e t c a s h i n f l o w}$

Break-even time or discounted payback period:

The break-even time is discounted payback period. When payback period concept includes the concept of present value, it is termed as break-even time.

Requirement 1

To compute:

• Payback period

• Break-even time

To determine

Requirement 2

To discuss:

Advantage of Break-even time over the payback period

To determine

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar

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On January 1, 2011, Phoenix Manufacturing purchased for $875,000, equipment having a useful life of eight years and an estimated salvage value of $67,500. Phoenix has recorded monthly depreciation of the equipment on the straight-line method. On December 31, 2018, the equipment was sold for $158,000. As a result of this sale, Phoenix Manufacturing should recognize a gain of___. Help me with this

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Answer 2

Question

Chapter 25, Problem 27E

To determine

Concept Introduction:

Payback period:

Capital budgeting is a planning process used to know whether a long term investment or options like to keep the old machine will be profitable or not involving factors like present value factors.

There are many capital budgeting techniques. The technique that will be discussed here is –

Payback period of the investment

Payback period –

Payback period of the investment is calculated as under –

$P a y b a c k p e r i o d = \frac{I n i t i a l I n v e s t m e n t - S a l v a g e v a l u e o f o l d e q u i p m e n t}{A n n u a l n e t c a s h i n f l o w}$

Break-even time or discounted payback period:

The break-even time is discounted payback period. When payback period concept includes the concept of present value, it is termed as break-even time.

Requirement 1

To compute:

• Payback period

• Break-even time

To determine

Requirement 2

To discuss:

Advantage of Break-even time over the payback period

To determine

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar

Expert Solution & Answer

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See solution

Answer 3

Question

Chapter 25, Problem 27E

To determine

Concept Introduction:

Payback period:

Capital budgeting is a planning process used to know whether a long term investment or options like to keep the old machine will be profitable or not involving factors like present value factors.

There are many capital budgeting techniques. The technique that will be discussed here is –

Payback period of the investment

Payback period –

Payback period of the investment is calculated as under –

$P a y b a c k p e r i o d = \frac{I n i t i a l I n v e s t m e n t - S a l v a g e v a l u e o f o l d e q u i p m e n t}{A n n u a l n e t c a s h i n f l o w}$

Break-even time or discounted payback period:

The break-even time is discounted payback period. When payback period concept includes the concept of present value, it is termed as break-even time.

Requirement 1

To compute:

• Payback period

• Break-even time

To determine

Requirement 2

To discuss:

Advantage of Break-even time over the payback period

To determine

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 25, Problem 27E

To determine

Concept Introduction:

Payback period:

Capital budgeting is a planning process used to know whether a long term investment or options like to keep the old machine will be profitable or not involving factors like present value factors.

There are many capital budgeting techniques. The technique that will be discussed here is –

Payback period of the investment

Payback period –

Payback period of the investment is calculated as under –

$P a y b a c k p e r i o d = \frac{I n i t i a l I n v e s t m e n t - S a l v a g e v a l u e o f o l d e q u i p m e n t}{A n n u a l n e t c a s h i n f l o w}$

Break-even time or discounted payback period:

The break-even time is discounted payback period. When payback period concept includes the concept of present value, it is termed as break-even time.

Requirement 1

To compute:

• Payback period

• Break-even time

To determine

Requirement 2

To discuss:

Advantage of Break-even time over the payback period

To determine

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 25, Problem 27E

To determine

Concept Introduction:

Payback period:

Capital budgeting is a planning process used to know whether a long term investment or options like to keep the old machine will be profitable or not involving factors like present value factors.

There are many capital budgeting techniques. The technique that will be discussed here is –

Payback period of the investment

Payback period –

Payback period of the investment is calculated as under –

$P a y b a c k p e r i o d = \frac{I n i t i a l I n v e s t m e n t - S a l v a g e v a l u e o f o l d e q u i p m e n t}{A n n u a l n e t c a s h i n f l o w}$

Break-even time or discounted payback period:

The break-even time is discounted payback period. When payback period concept includes the concept of present value, it is termed as break-even time.

Requirement 1

To compute:

• Payback period

• Break-even time

To determine

Requirement 2

To discuss:

Advantage of Break-even time over the payback period

To determine

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar

Answer 6

Chapter 25, Problem 27E

To determine

Concept Introduction:

Payback period:

Capital budgeting is a planning process used to know whether a long term investment or options like to keep the old machine will be profitable or not involving factors like present value factors.

There are many capital budgeting techniques. The technique that will be discussed here is –

Payback period of the investment

Payback period –

Payback period of the investment is calculated as under –

$P a y b a c k p e r i o d = \frac{I n i t i a l I n v e s t m e n t - S a l v a g e v a l u e o f o l d e q u i p m e n t}{A n n u a l n e t c a s h i n f l o w}$

Break-even time or discounted payback period:

The break-even time is discounted payback period. When payback period concept includes the concept of present value, it is termed as break-even time.

Requirement 1

To compute:

• Payback period

• Break-even time

Answer 7

Chapter 25, Problem 27E

To determine

Concept Introduction:

Payback period:

Capital budgeting is a planning process used to know whether a long term investment or options like to keep the old machine will be profitable or not involving factors like present value factors.

There are many capital budgeting techniques. The technique that will be discussed here is –

Payback period of the investment

Payback period –

Payback period of the investment is calculated as under –

$P a y b a c k p e r i o d = \frac{I n i t i a l I n v e s t m e n t - S a l v a g e v a l u e o f o l d e q u i p m e n t}{A n n u a l n e t c a s h i n f l o w}$

Break-even time or discounted payback period:

The break-even time is discounted payback period. When payback period concept includes the concept of present value, it is termed as break-even time.

Requirement 1

To compute:

• Payback period

• Break-even time

Answer 8

To determine

Requirement 2

To discuss:

Advantage of Break-even time over the payback period

Answer 9

To determine

Requirement 2

To discuss:

Advantage of Break-even time over the payback period

Answer 10

To determine

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar

Answer 11

To determine

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 25 - Prob. 1DQ Ch. 25 - What is capital budgeting?Ch. 25 - Prob. 3DQ Ch. 25 - Prob. 4DQ Ch. 25 - Prob. 5DQ Ch. 25 - Prob. 6DQ Ch. 25 - Prob. 7DQ Ch. 25 - Prob. 8DQ Ch. 25 - Prob. 9DQ Ch. 25 - Prob. 10DQ

Concept explainers

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Requirement 2

To discuss:

Advantage of Break-even time over the payback period

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar

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Chapter 25 Solutions

Concept explainers

Videos

Requirement 2 To discuss: Advantage of Break-even time over the payback period

Requirement 3 To list: Two conditions under which payback period and break-even time are similar

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Chapter 25 Solutions

Requirement 2

To discuss:

Advantage of Break-even time over the payback period

Requirement 3

To list:

Two conditions under which payback period and break-even time are similar