Question

Write Co is considering acquiring a manufacturing plant. The purchase price is $1.200.000. The owners believe the plant will generate net cash inflows of $302.000 annually I will have to be replaced in six years. Use the paybac method to determine whether White should purchase this plant. Round to one decimal place Select the formulation enter the amounts to calculate the payback period for the plant (Round payback to the decimal place XX) Payback The payback the plant must be replaced, so the payback method purchasing the plant

Answer 1

Solution: 1
	Calcutaltion of Payback period of purchase of Equipment
		Choose Numerator	/	Choose Denominator	=	Payback Period
		Initial Cash Outflow	/	Net Cash inflow Annually	=	Payback Period
	Payback Period =	$                              12,00,000	/	$                              3,02,000	=	4.0	Years
	Answer = Payback Period = 4.0 Years
Solution: 2
	The Payback Accurs Before the plant must be replaced , So the Payback method allow purchasing the plant