1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
raketka [301]
3 years ago
15

A machine can be purchased for $202,000 and used for five years, yielding the following net incomes. In projecting net incomes,

double-declining depreciation is applied, using a five-year life and a zero salvage value.
Year 1 Year 2 Year 3 Year 4 Year 5
Net incomes $18,000 $25,000 $53,000 $58,000 $108,000
Compute the machine’s payback period (ignore taxes).

Business
2 answers:
kolbaska11 [484]3 years ago
7 0

Answer:

the machine’s payback period is 2 years and 3 months.

Explanation:

First remove the depreciation expense from the net income because this is a non-cash item.

Depreciation Expense (double-declining method) = 2 × SLDP × BVSLDP

SLDP = 100 ÷ Number of useful life

         = 100 ÷ 5

         = 20 %

Year 1

Depreciation Expense = 2 × 20% × $202,000

                                     = $80,800

Year 2

Depreciation Expense = 2 × 20% × ($202,000 - $80,800)

                                     = $48,480

Year 3

Depreciation Expense = 2 × 20% × ($202,000 - $48,480)

                                     = $61,408

Year 4

Depreciation Expense = 2 × 20% × ($202,000 - $61,408)

                                     = $56,237

Year 5

Depreciation Expense = 2 × 20% × ($202,000 - $56,237)

                                     = $58,305

Summary of Cash flows will be :

Year 1 = $18,000 + $80,800 = $98,800

Year 2 = $25,000 + $48,480 = $72,480

Year 3 = $53,000 + $61,408 = $114,408

Year 4 = $58,000 + $56,237 = $114,237

Year 5 = $108,000 + $58,305 = $166,305

Payback period :

$202,000 = Year 1 ($98,800) + Year 2 ($72,480) + $30,720 / $114,408

                 = 2 years and 3 months

FinnZ [79.3K]3 years ago
3 0

Answer:

2.36 years

Explanation:

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

To derive cash flows from net income, depreciation expenses should be added to net income.

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life) = 2 / 5 = 0.4

Deprecation expense in year 1 = 0.4 x $202,000 = $80,800

Book value in year 2 = $202,000 - $80,800 = $121,200

Deprecation expense in year 2 = 0.4 x $121,200 = $48,480

Book value in year 3 = $121,200 - $48,480 = $72,720

Deprecation expense in year 3 = 0.4 x $72,720 = $29,088

Book value in year 4 = $72,720 - $29,088 = $43,632

Deprecation expense in year 4 = $43,632 x 0.4 = $17,452.80

Book value in year 5 = $43,632 x 0.4 - $17,452.80 = $26,179.20

Deprecation expense in year 5 = $26,179.20 x 0.4 = $10,471.68

Cash flow in year 1 = $18,000 +  $80,800 = $98,800

Cash flow in year 2 = $25,000 + $48,480 = $73,480

Cash flow in year 3 = $53,000  + $29,088 = $82,088

Cash flow in year 4 = $58,000  + $17,452.80 = $75,452.80

Cash flow in year 5 = $108,000 + $10,471.68 = $118,471.68

Please check the attached image for how the payback period was calculated

You might be interested in
Lucie is reviewing a project with an initial cost of $38,700 and cash inflows of $9,800, $16,400, and $21,700 for Years 1 to 3,
Alecsey [184]

Answer:

Results are below.

Explanation:

To determine whether the project should be accepted or not, we need to calculate the net present value. <u>If the NPV is positive, the project should be accepted.</u>

<u>To calculate the NPV, we will use the following formula:</u>

NPV= -Io + ∑[Cf/(1+i)^n]

Cf1= 9,800/1.0975= 8,929.38

Cf2= 16,400/1.0975^2= 13,615.54

Cf3= 21,700/1.0975^3= 16,415.20

Total= $38,960.12

NPV= -38,700 + 38,960.12

NPV= 260.12

<u>The project is profitable. </u>

5 0
3 years ago
Why is it useful for organizations to think in terms of designing a mix of programs rather than choosing one overall compensatio
Andreas93 [3]

Answer with explanation:

It is better for companies to offer a mixture of compensation programs instead of only one since it attracts a major number of competent workers. Some employees might be very selective at the time of choosing a job according to the benefits they could receive. For instance, a high executive could prefer to start working in an "A" firm since they organization offers an attractive number of stock shares per year as part of the compensation program instead of working for firm "B" that is not even publicly listed.

7 0
3 years ago
A “dashboard” provides short-term information and is primarily used by
kogti [31]
<span>A “dashboard” provides short-term information and is primarily used by people wanting a quick overview of certain data or performance tracking metrics.</span>
6 0
3 years ago
This is a good question to ask during an interview A) How many vacation days do I get? B) What kind of products or services do y
jeka94

Answer:

C) How many hours of training will I need?

3 0
3 years ago
Which of the following taxes is NOT removed from your paycheck automatically?
nalin [4]

The answer to this is A.

4 0
3 years ago
Read 2 more answers
Other questions:
  • Jen purchased a condo in naples fl for $699,000. she put 20% down and financed the rest at 5% for 35 years. what are jen's total
    9·2 answers
  • Last year, Tinklenberg Corporation's variable costing net operating income was $52,400 and its inventory decreased by 1,400 unit
    6·2 answers
  • The following transactions occur for Badger Biking Company during the month of June: a. Provide services to customers on account
    9·1 answer
  • How did the economy impact the livelihood of the 13 original colonies? open study?
    7·1 answer
  • This table shows the number of cookies several bakeries sell each day. Bakery Number of Cookies Sold Mrs. Track’s 90 Chips 100 T
    7·2 answers
  • Suppose the demand for good X is given by Qd x = 10 - 2Px + Py + M. The price of good X is $1, the price of good Y is $10, and i
    12·1 answer
  • Notamos que, por vezes, os preços dos itens nos supermercados variam em algumas casas de centavos. Contudo, devido à proximidade
    8·1 answer
  • Illustrate how a liberalized global economy can influence upon natural resources concerning the granting of logging franchise ri
    9·1 answer
  • Should High School make it mandatory for all students to wear school uniforms each day to school?
    9·1 answer
  • When two goods are substitutes production then what??​
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!