You have the opportunity to expand your business by purchasing new equipment for $152,000.
The equipment has a useful life of 9 years. You expect to incur cash fixed costs of $79,000 per year to use this new equipment, and you expect to incur cash variable costs in the amount of 5% of annual revenues. Your cost of capital is 6%.
Requirements
1.
Calculate the payback period and the discounted payback period for this investment,
assuming you will generate
$150,000 in cash revenues every year.
2.
Assume instead you expect a cash revenue stream for this investment.
Based on this estimated revenue stream,
Year 1 $ 105,000
Year 2 115,000
Year 3 110,000
Year 4 90,000
Year 5 160,000
Year 6 150,000
Year 7 160,000
Year 8 110,000
Year 9 160,000
What are the payback and discounted payback periods for this investment?
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here