Paramount Carpets is considering purchasing new equipment costing $730,000
The company's management has estimated that the equipment will generate cash flows as follows:
Year 1 $204,000
2 204,000
3 266,000
4 266,000
5 150,000
Considering the residual value is zero, calculate the payback period. (Round your answer to two decimal places.)
A) 4.61 years
B) 3.21 years
C) 3.42 years
D) 3.70 years
B .B)
Net cash
outflows Net cash inflows
Amount
Year invested Annual Accumulated
0 730,000
1 $204,000 $204,000
2 204,000 408,000
3 266,000 674,000
4 266,000 940,000
5 150,000 1,090,000
Payback = 3 years + ($730,000 âˆ' $674,000 ) / $266,000 = 3.21 years
You might also like to view...
Which of the following is not one of the important aspects of the Sarbanes-Oxley Act?
A) The creation of the Public Company Accounting Oversight Board B) New rules for auditors and management C) New roles for audit committees D) New rules for information systems development
Each stage in a supply chain is connected through the flow of products, information, and funds. These flows often occur in both directions and are usually managed by
A) pricing department. B) one of the stages. C) upper management. D) engineering department.