Question

In: Accounting

A machine can be purchased for $252,000 and used for five years, yielding the following net...

A machine can be purchased for $252,000 and used for five years, yielding the following net incomes. In projecting net incomes, double-declining depreciation is applied, using a five-year life and a zero salvage value.

Year 1

Year 2

Year 3

Year 4

Year 5

Net income

$

13,000

$

28,000

$

62,000

$

48,000

$

101,000


Compute the machine’s payback period (ignore taxes). (Round payback period answer to 3 decimal places.)

Computation of Annual Depreciation Expense

Year       Beginning Book Value    Annual Depr. (40% of Book Value)            Accumulated Depreciation at Year-End                Ending Book Value          

1                                                                             

2                                                             

3                                                             

4                                                             

5                                                             

Annual Cash Flows

Year       Net income         Depreciation      Net Cash Flow   Cumulative Cash Flow   

0              $(252,000)                                           $(252,000)          

1              13,000                                  

2              28,000                                  

3              62,000                                  

4              48,000                                  

5              101,000                                                

Payback period =                              years

Solutions

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