Exercise 25-1 Payback period computation; uneven cash flows LO P1
Beyer Company is considering the purchase of an asset for $360,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year.
Year 1
Year 2
Year 3
Year 4
Year 5
Total
Net cash flows
$
80,000
$
50,000
$
70,000
$
250,000
$
13,000
$
463,000
Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your answers to 2 decimal places.)
A machine can be purchased for $210,000 and used for 5 years, yielding the following net incomes. In projecting net incomes, double-declining balance depreciation is applied, using a 5-year life and a zero salvage value.
Year 1
Year 2
Year 3
Year 4
Year 5
Net incomes
$
13,000
$
28,000