All categories

3 years ago

Compute the payback period for each of these two separate investments:

Business

1 answer:

musickatia [10]3 years ago

5 0

Answer:

1.89 years and 2.91 years

Explanation:

The formula to compute the payback period is shown below:

= Initial investment ÷ Net cash flow

For first case

The initial investment is $260,000

And, the net cash flow is shown below:

= Depreciation + incremental after tax income

where,

Depreciation equals to

= (Original cost - residual value) ÷ (useful life)

= ($260,000 - $10,000) ÷ (4 years)

= ($20,000) ÷ (4 years)

= $62,500

And the incremental after tax income is $75,000

So, the net cash flow would equal to

= $62,500 + $75,000

= $137,500

So, the payback period would be

= $260,000 ÷ $137,500

= 1.89 years

For second case

The initial investment is $170,000

And, the net cash flow is shown below:

= Depreciation + incremental after tax income

where,

Depreciation equals to

= (Original cost - residual value) ÷ (useful life)

= ($170,000 - $14,000) ÷ (9 years)

= ($156,000) ÷ (9 years)

= $17,333

And the incremental after tax income is $41,000

So, the net cash flow would equal to

= $17,333 + $41,000

= $58,333

So, the payback period would be

= $170,000 ÷ $58,333

= 2.91 years

You might be interested in

Cordell Inc. experienced the following events in Year 1, its first year of operation: Received $59,000 cash from the issue of co

faltersainse [42]

Answer:

a & c. See part a & c of the attached excel file for the table. In the attached excel file, Total revenue = $100,000; and Total expenses = $61,900.

b. The amount of net income reported on the 2018 income statement is $38,100.

d. The amount of cash flow from operating activities reported on the 2018 statement of cash flows is $25,000.

e. Before closing balance in service revenue account = $100,000; and After closing balance = $0.

f. The balance of the retained earnings account that appears on the 2018 balance sheet is $32,200.

Explanation:

a. & c. Identify the events that result in revenue or expense recognition and those which affect the statement of cash flows. In the Statement of Cash Flows column, use OA to designate operating activity, FA for financing activity, IA for investing activity and NA to indicate the element is not affected by the event.

Note: See part a & c of the attached excel file for the table.

From the attached excel file, we have:

Total revenue = $100,000

Total expenses = $61,900

b. Based on your response to Requirement a, determine the amount of net income reported on the 2018 income statement.

Based on part a & c above, we can determine this as follows:

Net income = Total revenue - Total expenses = $100,000 - $61,900 = $38,100

Therefore, the amount of net income reported on the 2018 income statement is $38,100.

d. Based on your response to Requirement c, determine the amount of cash flow from operating activities reported on the 2018 statement of cash flows.

Note: See part d of the attached excel file for the amount of cash flow from operating activities.

From the attached excel file, we have:

Cash flow from operating activity = $25,000

Therefore, the amount of cash flow from operating activities reported on the 2018 statement of cash flows is $25,000.

e. What is the before- and after-closing balance in the service revenue account?

Before closing balance in service revenue account = Services performed on account + Services performed for cash = $81,000 + $19,000 = $100,000

After closing balance = $0

The "after closing balance" is equal to zero because, at the end of a particular period, the balance of the service revenue account turns to $0 when the firm has to close the balance of the service revenue account in the retained earnings.

f. What is the balance of the retained earnings account that appears on the 2018 balance sheet?

Retained earnings = Net income - Cash dividend paid to the stockholders = $38,100 - $5,900 = $32,200

Therefore, the balance of the retained earnings account that appears on the 2018 balance sheet is $32,200.

Download xlsx

6 0

2 years ago

A client, age 67, owns his own home free and clear. The customer has an annual income of $25,000, mainly from social security an

FromTheMoon [43]

Answer:

The best recommendation to be made to this client is to do nothing.

Explanation:

Investment in stock is a highly risky investment because price of stock often fluctuates which can make an investor to lose a lot of money.

From the question, the client is already old at age 67 with a low income and he does not have any other liquid assets apart from the annual income of $25,000, mainly from social security and interest on funds held in a bank savings account.

Since losing so much money through investment in stock is not affordable to him, the best recommendation to be made to this client is to that he should do nothing.

3 0

3 years ago

which management theory uses time-motion studies to find the one best method for workers to perform each task and then teaches t

sergij07 [2.7K]

Taylor's Scientific management theory employs time-motion research to determine the best approach for personnel to execute each task and then teaches them that method.

Taylor's Scientific Management seeks the most effective approach to execute every task. He believed in universal rules that governed efficiency and that these laws were independent of human judgment. The purpose of Scientific Management was to find the "one best way" to accomplish things as effectively as possible. Frederick Winslow Taylor was an American mechanical engineer who lived from 1856 to 1915. He was the first management consultant and the first to examine work and production scientifically.

He is regarded as the father of Scientific Management and the efficiency movement. Taylor's Incentive Theory, often known as Scientific Management, was one of the first workplace motivation theories.

Learn more about teaches here

brainly.com/question/28591852

#SPJ4

7 0

11 months ago

. Jeff works as a computer repair technician. He has money in a savings account and he owns some stock. What types of income doe

Alex17521 [72]

I think the correct answer from the choices listed above is the last option. H<span>e earns a salary from his work, interest on his savings account, and dividends on his stock holdings. Hope this answers the question. Have a nice day.</span>

5 0

3 years ago

Prepare journal entries to record each of the following four separate issuances of stock. A corporation issued 7,000 shares of $

marysya [2.9K]

Answer:

The Journal entries are as follows:

(i) cash A/c Dr. $84,000

To Common stock, $10 par value $70,000

To Paid-in capital in excess of par value, Common stock $14,000

(To record the issuance of stock)

(ii) Organization expenses A/c Dr. $55,000

To Common stock, $2 stated value $7,000

To Paid-in capital in excess of stated value, Common stock $48,000

(To record the issuance of stock)

(iii) Organization expenses A/c Dr. $55,000

To Common stock, no-par value $55,000

(To record the issuance of stock)

(iv) Cash A/c Dr. $142,500

To Preferred stock, $50 par value[1,750 × $50) $87,500

To Paid-in capital in excess of par value, preferred stock $55,000

(To record the issuance of stock)

3 0

3 years ago