Please do not give solution in image format thanku Jordan Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leasedon an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Jordanwould sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow:YearYear 1Year 1Year 2Year 3Year 3.Year 4Year 5Year 5Nature of ItemPurchase priceRevenueRevenueRevenueMajor overhaulRevenueRevenueSalvage valueCash Inflow$34,50034,50029,500a. Payback period (accumulated cash flows)b. Payback period (average cash flows)20,50018,5007,700Cash Outflow$89,600Requireda.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimalplace.)8,900yearsyears

Payback period is one of the technique used in capital budgeting. Payback period means time period…

Jordan Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Jordan would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Year 1 Year 2 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Year 3 Year 3 Year 4. Year 5 Year 5 Salvage value Cash Inflow Cash Outflow $89,600 $34,500 34,500 29,500 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 20,500 18,500 7,700 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decima place.) 8,900 years years

Jordan Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Jordan would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Year 1 Year 2 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Year 3 Year 3 Year 4. Year 5 Year 5 Salvage value Cash Inflow Cash Outflow $89,600 $34,500 34,500 29,500 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 20,500 18,500 7,700 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decima place.) 8,900 years years

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 21P

See similar textbooks

Similar questions

Franklin Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Franklin would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: \table[[Year,Nature of Item,Cash Inflow,Cash Outflow],[Year 1,Purchase price,,$86,800
Solomon Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Solomon would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Year 1 Year 2 Year 3 Year 3 Year 4 Year 5 Year 5 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Salvage value Cash Inflow $37,000 37,000 26,000 23,000 21,000 8,200 Cash Outflow $90,600 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 9,400 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. Note: Round your answers to 1 decimal place. years years
Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift.would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Nature of Item Purchase price Cash Outflow $99,000 Year Cash Inflow Year 1 Year 1 $40,000 40,000 29,000 Revenue Year 2 Revenue Year 3 Revenue Major overhaul Revenue 10,000 Year 3 Year 4 Year 5 Year 5 26,000 24,000 8,800 es Revenue Salvage value Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.) a. Payback period (accumulated cash flows) b. Payback period (average cash flows) years years
Nala Inc. purchased a plot of land on which a $60,000 payment will be due each year for the next five years. What is the present value of these cash payments when the discount rate is 12%?
1. Samos Excavating is considering purchasing some new equipment for the company. Due to the expense involved, the equipment company is giving Samos the option of choosing among four different payments plans. 1) $500,000 due immediately in cash 2) $150,000 down payment due immediately; $60,000 per year for 10 years, beginning at the end of the current year 3) $150,000 down payment due immediately; $30,000 per year for 4 years beginning at the end of the current year; $80,000 per year for 8 years beginning at the end of the fourth year after the initial purchase 4) $65,000 due immediately and at the beginning of each of the next 11 years Required: Samos will select the payment plan with the lowest present value. The effective interest rate during the future periods is 10%. Which option should Samos choose?
The West Mount Trading deposited yearly an amount of $5000 for 15 years. The accumulated amount was used to cover an emergency repair costing $100,000 in year 15. Draw the cash flow diagram. Calculate the rate of return of that this investment provided to the West Mount Trading.
The Owner of Blue Bayou Café usually pays his appliance (refrigerators, dish washers, and freezers) maintenance contract by the year. If he projects the annual costs shown, find the equivalent A value for years 1 through 5. Year Cash Flow, $/Year Estimated i Per Year 0 0 1– 3 5000 10% 4– 5 7000 12%
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $480,000 cost with an expected four-year life and a $20,000 salvage value. Additional annual information for this new product line follows. Required 1. Determine income and net cash flow for each year of this machine’s life.2. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year.3. Compute net present value for this machine using a discount rate of 7%.
Mike’s Camping Supply is considering the purchase of new equipment for $750,000. The equipment will allow the company to generate additional cash revenues of $180,000 each year. The company will incur total expenses of $64,000 from the machine each year, including $7,000 related to depreciation. Calculate the cash payback period, rounding answer to two decimal places.
Alpha Company is planning to invest in a machine, the use of which will result in the following:• Annual revenues of $ l 0.000 in the first year and increases of $5,000 eachyear. up to year 9. From year IO. the revenues will remain constant ($52,000)for an indefinite period.• The machine is to be overhauled every 10 years. TI1c expense for each overhaul is $40.000.If Alpha expects a present worth of at least $100,000 at a MARR of 10% forthis project. what is the maximum investment that Alpha should be prepared to make?(a) $250.140(b) $67.697(c) $350, 100(d) $509.600
Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Year 1 Year 2 Year 3 Year 4 Year 5 Annual Net Cash Flows $ 40,000 $ 40,000 $ 35,000 $ 35,000 $ 30,000 Compute the payback period for this investment. (Round to two decimal places.) Multiple Choice O 2.85 years. 2.57 years.
Company A is considering the purchase of a new equipment. This equipment will cost $250,000 and will be depreciated using an MACRS GDS recovery period of 7 years. The equipment is expected to have a market value of $50,000 at the end of its estimated 8-year life. What is the depreciation amount on the second year? What is the Book Value at the end of the 3rdyear? Assume that the asset will be disposed of in year 3.