Question
table is in a different pic
present value of a 10. AO S-1,288 BO S-1.610 CO 8-2,012 D - 10 18 pt X Company must replace one of its current machines with
Period 1 2 3 3% 0.971 0.943 0 .915 0.888 | 0.863 0.837 0.813 079 4% 0.962 0.925 0.889 0.855 10.822 0.790 0.760 0.731 5% 0.952
0 0
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Answer #1
Extra cost of Machine B = 73,000-52,000 = $21000
Year Incremental Cash flows Cumulative Cash flows
0 -21000 -21000
1 -1000 -22000
2 4000 -18000
3 5000 -13000
4 5000 -8000
5 3000 -5000
6 3000 -2000
7 2000 0
Hence, payback period = 7 years
i.e. F
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