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.)

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 1 year ago

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