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3 years ago

Payback period computation; even cash flows LO P1

Business

1 answer:

uranmaximum [27]3 years ago

3 0

Answer:

A. 2.2 years

B. 3.6 years

Explanation:

Payback period calculates the amount of the time it takes to recover the amount invested in a project from its cumulative cash flows.

Payback = amount invested / annual cash flows

Payback period is calculated using cash flows. So, the net income has to be changed to cash flows by adding back depreciation.

For the first machine

Straight line depreciation expense = (Cost of asset - salvage value) / number of years

( $520,000 - $10,000) / 6 = $85,000

Cash flow = $85,000 + $150,000 = $235,000

For the second machine, depreciation = ( $380,000 - $20,000) / 8 = $45,000

Cash flow = $45,000 + $60,000 = $105,000

Payback period for machine a = $520,000 / $235,000 = 2.2 years

Pay back period For machine b =

$380,000 / $105,000 = 3.6 years

I hope my answer helps you

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2 years ago

Accounting: explain the weakness in internal control and identify the internal control principle that violated?1. Each week, Kat

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Answer:

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Explanation:

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3 years ago

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3 years ago

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Answer:

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Explanation:

Solution:

Data given:

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What is the total cost of the business = ?

Formula for total cost of the business is:

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Here we have, Total variable cost not the average variable cost per unit.

So,

Average variable cost per unit = Total variable cost/ units produced

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Average variable cost per unit = 1/2 = £0.5 per unit.

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3 years ago

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