Question

6. Delley Inc. is considering the acquisition of equipment that costs $340,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are: Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Incremental Net Cash Flows $94,000 $133,000 $96,000 $116,000 $115,000 $87,000 The payback period of this investment, rounded off to the nearest tenth of a year, is closest to: A) 3.9 years B) 3.6 years C) 3.1 years D) 5.0 years

Answer 1

Giren: Incremental Net cash flow um w mm yeon cash flow comulatie coyhflow -340000 - 340000 94000 -246000 133000 -113000 96000 -17000 116000 99000 115000 214000 87000 301000 Formulai- @ = A+ (BIC) 1 year :- =4+ (246000 / 94000) Az last year with negative cash flow B = absolute value of cumulative cash flow at Peoriod A c= cash flow during yeon A. 3.62 yeary = 3.9 yeary

Б) - а+ CT 13000 / 1,33,600) -a-85 Чозу - 3-6 Jooy © 3t (1+000/ 4Gooo) = 3- 18 yeogy - 3.1 Зву а) - 4+ Сq ooo) 1 1 6000) - 4-8 6 цах) = 5-о ау. S + Ca Jчооо/ ISooo) © - 6-8 часу е - 6+ (30| ooo {s occ) - 9.46 yany — 0 —