ACC 212 Homework 8

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