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Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Blaylock Company wants to...

Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $900,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,400,000 $1,000,000 2 1,400,000 1,000,000 3 1,400,000 1,000,000 4 1,400,000 1,000,000 5 1,400,000 1,000,000 Required: Compute the payback period for the NC equipment. Round your answer to one decimal place.

Payback period = years

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Answer #1
Year Cash Revenues Cash expenses Net cash flow
0 -900000
1 1400000 1000000 400000
2 1400000 1000000 400000
3 1400000 1000000 400000
4 1400000 1000000 400000
5 1400000 1000000 400000
Payback Period = Initial Investment/ Annual net cash flow
Payback period = $900000/400000 2.3 Years
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