Question
In: Accounting
A machine can be purchased for $269,000 and used for five years, yielding the following net...
A machine can be purchased for $269,000 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 $ 21,000 $ 49,000 $ 68,000 $ 57,000 $ 132,000 Compute the machine’s payback period (ignore taxes). (Round payback period answer to 3 decimal places.)
Solutions
Expert Solution
| Depreciation Schedule | |||||
| Year | Book Value Start | Depreciation Rate | Depreciation | Accumulated Dep | Book Value End |
| 1 | $269,000 | 40.00% | $107,600 | $107,600 | $161,400 |
| 2 | $161,400 | 40.00% | $64,560 | $172,160 | $96,840 |
| 3 | $96,840 | 40.00% | $38,736 | $210,896 | $58,104 |
| 4 | $58,104 | 40.00% | $23,242 | $234,138 | $34,862 |
| 5 | $34,862 | 40.00% | $13,945 | $248,083 | $20,917 |
|
Year |
Net Income | Depreciation | Cash Flow | Accumulated Cash Flow | |
| a | b | c | d=c+b | e | |
| 0 | $ - | $ - | $ -2,69,000 | $ -2,69,000 | |
|
1 |
$ 21,000 | $ 1,07,600 | $ 1,28,600 | $ -1,40,400 | |
|
2 |
$ 49,000 | $ 64,560 | $ 1,13,560 | $ -26,840 | |
|
3 |
$ 68,000 | $ 38,736 | $ 1,06,736 | $ 79,896 | |
|
4 |
$ 57,000 | $ 23,242 | $ 80,242 | $ 1,60,138 | |
|
5 |
$ 1,32,000 | $ 13,945 | $ 1,45,945 | $ 3,06,083 | |
| Payback Peiod = 2 year + 26840/106736 | |||||
| =2.251 years | |||||
ekkarill92 answered 10 months agoRelated Solutions
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