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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

Expert Solution

for formulas and calculations, refer to the image below -

ekkarill92 answered 10 months ago

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