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Payback Period | = | 4 | years |
Workings: | |||
Year | Machine A | Machine B | Incremental Cash Flow |
1 | $ 6,000 | $ 7,000 | $ -1,000 |
2 | $ 8,000 | $ 4,000 | $ 4,000 |
3 | $ 8,000 | $ 3,000 | $ 5,000 |
4 | $ 8,000 | $ 3,000 | $ 5,000 |
5 | $ 6,000 | $ 3,000 | $ 3,000 |
6 | $ 5,000 | $ 2,000 | $ 3,000 |
7 | $ 4,000 | $ 2,000 | $ 2,000 |
Incremental Cost | = | $65000 - $52000 | |
= | 13000 | ||
Year | Investment | Cash Inflow | Cumulative Cash Flow |
1 | $ -13,000 | $ -1,000 | $ -14,000 |
2 | $ 4,000 | $ -10,000 | |
3 | $ 5,000 | $ -5,000 | |
4 | $ 5,000 | $ - | |
5 | $ 3,000 | $ 3,000 | |
6 | $ 3,000 | $ 6,000 | |
7 | $ 2,000 | $ 8,000 | |
Payback Period | = | 4 | years |
X Company must replace one of its current machines with either Machine A or Machine B....
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $52,000, and Machine B costs $60,000. Estimated annual cash flows with the two machines are as follows: Year NM Machine A $ 6,000 8,000 8,000 8,000 6,000 5,000 4,000 Machine B $ 7,000 4,000 3,000 3,000 3,000 2,000 2,000 N If X Company buys Machine B instead of Machine A, what is...
X Company must replace one of its current machines with either
Machine A or Machine B. The useful life of both machines is seven
years. Machine A costs $51,000, and Machine B costs $70,000.
Estimated annual cash flows with the two machines are as
follows:
Year
Machine A
Machine B
1
$-6,000
$-7,000
2
-8,000
-4,000
3
-8,000
-3,000
4
-8,000
-3,000
5
-6,000
-3,000
6
-5,000
-2,000
7
-4,000
-2,000
If X Company buys Machine B instead of Machine...
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X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $49,000, and Machine B costs $70,000. Estimated annual cash flows with the two machines are as follows: Year Machine A $-6,000 -8,000 -8,000 -8,000 -6,000 -5,000 -4,000 Machine B $-7,000 -4,000 -3,000 -3,000 -3,000 -2,000 -2,000 If X Company buys Machine B instead of Machine A, what is the payback period (in...
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