15) Vandezande Inc. is considering the acquisition of a new machine that costs $370,000 and has...
15) Vandezande Inc. is considering the acquisition of a new machine that costs $370,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.):
| Incremental Net Operating Income | Incremental Net Cash Flows | |||||
| Year 1 | $ | 54,000 | $ | 128,000 | ||
| Year 2 | $ | 31,000 | $ | 105,000 | ||
| Year 3 | $ | 52,000 | $ | 126,000 | ||
| Year 4 | $ | 49,000 | $ | 123,000 | ||
| Year 5 | $ | 48,000 | $ | 122,000 | ||
Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period of this investment is closest to:
Multiple Choice
-
2.9 years
-
3.1 years
-
5.0 years
-
4.9 years
Homework Answers
| year 1 | 128000 | |||
| year 2 | 105000 | |||
| year 3 | 126000 | |||
| 359000 | ||||
| year 4 | 11000/123000 | |||
| 0.089431 | ||||
| answer | 3.1 | year | ||
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15) Vandezande Inc. is considering the acquisition of a new
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