Question

You want to get approval for a capital expense to bring the copy service back in house. An investment of $24,000.00 for a dedicated computer and a new copy machine will support the ROI staff you already have. You estimate that it will bring in a cash income of $40,000.00 over the next 5 years. Your facility uses straight-line depreciation to calculate the average net income.

1. Use Table 6-32 to figure the rate of return on the NPV and Table 6-33 to determine the number of years it will take for the payback.

2. Then, use this formula to calculate the paybak period= INITIAL OUTLAY (investment)/Average Net Income=Payback Period

3. How many years will it take to pay back the investment?

Table 6-32: Net Present Value at 10.0%

Net Present Value at 10.0%
Years	Net Cash Flow	Factor for NPV at 10.0%	Present Value of Cash Flow
1	$2,000	$0.909091
2	$5,000	$0.826446
3	$9,000	$0.751315
4	$11,000	$0.683013
5	$13,000	$0.620921

Table 6-33: Payback Method of Evaluating the Capital Expense for the In-House Copy Service

Payback Method of Evaluating the Capital Expense for the In-House Copy Service
Year	Average Net Income	Initial Investment	Remaining
0		$24,000
1
2
3
4
5
6
Total

$I9781305482999_c06_0002.jpg$

Answer 1

in case you have any query, please ask in comments.