Can you explain why they divided the $180,000 by 5 years? Their explanation for how they got their answer is not clear to me.
Extracted text: Edit View History Bookmarks Profiles Tab Window Help Graw Hill Connect E Chapter 12. Capital Budgeting X ewconnect.mheducation.com - Introduction to Managerial Accounting - Brewer, Garrison, Noreen, 8e, Capital Budgeting Decisions Pizza Pizazz is considering purchasing a new pizza oven that will speed up cooking time and save costs. The oven costs $180,000 and will last 5 years. It should increase net operating income by $14,000 year and will be depreciated using the straight-line method. The old pizza oven will be traded in and has a salvage value of $20,000. The payback period for the new oven is: X Sorry, your answer is incorrect. 目 Read about this 12.8 years Missed! V3.2 years $180,000/5 = $36,000 depreciation + $14,000 net operating income = $50,000 cash flow. ($180,000 - $20,000)/$50,000 = 3.2 years 3.6 years X 11.4 years $180,000/5 = $36,000 depreciation + $14,000 net operating income = $50,000 cash flow. ($180,000 - $20,000)/$50,000 = 3.2 years Challenge OK