A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computationincludes annual depreciation expense of $10,000.IncomeYearYear 1$3,300Initial investYear 1Year 2Year 3Year 4Year 5Year 2$8,300Compute the machine's payback period.Note: Round payback period answer to 2 decimal places.Net Income Depreciation3,3008,30030,00012,40033,200Year 3$30,000Year 4$12,400Net Cash Flow$(50,000) $Payback period=Year 5$33,200Cumulative Net CashFlow(50,000)00

The question is related to Capital Budgeting. Payback Period is the length of time required to…

A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $10,000. Income Year Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 $3,300 Compute the machine's payback period. Note: Round payback period answer to 2 decimal places. Net Income $ Year 2 $8,300 3,300 8,300 30,000 12,400 33,200 Year 3 $30,000 Depreciation Year 4 $12,400 Net Cash Flow $ (50,000) $ Payback period = Year 5 $33,200 Cumulative Net Cash Flow (50,000) 0 0

A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $10,000. Income Year Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 $3,300 Compute the machine's payback period. Note: Round payback period answer to 2 decimal places. Net Income $ Year 2 $8,300 3,300 8,300 30,000 12,400 33,200 Year 3 $30,000 Depreciation Year 4 $12,400 Net Cash Flow $ (50,000) $ Payback period = Year 5 $33,200 Cumulative Net Cash Flow (50,000) 0 0

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 2P

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