A machine can be purchased for $222,000 and used for five years, yielding the following net...

A machine can be purchased for $222,000 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		$	19,000		$	49,000		$	59,000		$	57,500		$	105,000

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	$(222,000)			$(222,000)
1	19,000
2	49,000
3	59,000		59,000	59,000
4	57,500		57,500	116,500
5	105,000		105,000	221,500

Payback period =					years

Expert Solution

Computation of Annual depreciation Expenser Year Begining Annual depreciation (40l of book value) Ending Book value Accumulated depreciation at year-end Book - value 222,000 88,800 88,800 133200 133,200 53280 142080 79,920 79.920 31,908 174048 441952 47,952 19180.8 28771-20 28,77120 28,711:20 193228.80 222,000

Annual Cash Hows Year Net Income Depreciation Net cash flow Commulative Cash flow. $1222,000) 0 $(222,000) $19.000 $88,800 $107,800 $ (11201200) - $ (11,920) $49,000 $53,280 $102,280 03 $ 79,048 $59.000 $31,968 $90,968 ~ $ 155,728.8 761680-8 54,500 $571500 $19.180.8 + $2891440 133,711-2 $105,000 6 $28,711-20 Pay 11,920 Pay-back penod: 2+ 90,968 = 8+ 0.1310 = 2.131 years. Il

Computation of Annual depreciation Expenser Year Begining Annual depreciation (40l of book value) Ending Book value Accumulated depreciation at year-end Book - value 222,000 88,800 88,800 133200 133,200 53280 142080 79,920 79.920 31,908 174048 441952 47,952 19180.8 28771-20 28,77120 28,711:20 193228.80 222,000

Annual Cash Hows Year Net Income Depreciation Net cash flow Commulative Cash flow. $1222,000) 0 $(222,000) $19.000 $88,800 $107,800 $ (11201200) - $ (11,920) $49,000 $53,280 $102,280 03 $ 79,048 $59.000 $31,968 $90,968 ~ $ 155,728.8 761680-8 54,500 $571500 $19.180.8 + $2891440 133,711-2 $105,000 6 $28,711-20 Pay 11,920 Pay-back penod: 2+ 90,968 = 8+ 0.1310 = 2.131 years. Il

ekkarill92 answered 1 year ago

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