Answered

Explore Westonci.ca, the leading Q&A site where experts provide accurate and helpful answers to all your questions. Connect with a community of experts ready to help you find accurate solutions to your questions quickly and efficiently. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.

A company with $690,000 in operating assets is considering the purchase of a machine that costs $78,000 and which is expected to reduce operating costs by $20,000 each year. These reductions in cost occur evenly throughout the year. The payback period for this machine in years is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)

Sagot :

facundobuzzetti

Answer:

It will take 3 years and 37 days to cover the initial investment.

Explanation:

Giving the following information:

Initial investment= $78,000

Cash flow= $20,000

The payback period is the time required for the cash flows to cover the initial investment:

Year 1= 20,000 - 78,000=-58,000

Year 2= 20,000 - 58,000= 38,000

Year 3= 20,000 - 38,000= 18,000

Year 4= 20,000 - 18,000= 2,000

To be more accurate:

(2,000/20,000)= 0.1*365= 37

It will take 3 years and 37 days to cover the initial investment.

We hope this information was helpful. Feel free to return anytime for more answers to your questions and concerns. Thank you for choosing our platform. We're dedicated to providing the best answers for all your questions. Visit us again. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.