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Daniel [21]
4 years ago
13

A company with $500,000 in operating assets is considering the purchase of a machine that costs $60,000 and which is expected to

reduce operating costs by $15,000 each year. These reductions in cost occur evenly throughout the year. The payback period for this machine in years is closest to (Ignore income taxes.):
Business
1 answer:
Masteriza [31]4 years ago
4 0

Answer:

Payback = 4 years

Explanation:

If a project has equal annual cash-flows, the payback period can be  calculated using the formula:

Payback=\frac{CostOfMachine}{AnnualCashflows}

The reduction in operating costs resulting from the purchase of the machine is treated as cash inflows for capital investment decisions. As such, annual cash inflows to be used in the formula above =$15,000 each year.

Payback=\frac{60,000}{15,000}=4years

It will take the company 4 years to recover the initial investment.

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The December 31, 2015, balance sheet of Maria’s Tennis Shop, Inc., showed current assets of $1,105 and current liabilities of $9
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Answer:

$165

Explanation:

The working capital of organization is the difference between the current assets and the current liabilities of the organization. It shows if a company has enough short term assets or asset that can be converted quickly to cash to settle obligations that will arise in the short term.

Working capital as at December 31, 2015

=$1,105 - $915

=$190

Working capital as at December 31, 2016

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Change in working capital in 2016

= $365 - $190

= $165

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3 years ago
What are six resources for helping you decide what type of business to start and how to start it
zaharov [31]
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IgorLugansk [536]

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A) True

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