1. Brady Corp. is considering the purchase of a piece of equipment that costs $23,000. Projected net annual cash flows over the project%u2019s life are:

Year Net Annual Cash Flow

1 $ 3,000

2 8,000

3 15,000

4 9,000

The cash payback period is

b. 2.80 years.

2. Bradshaw Inc. is contemplating a capital investment of $85,000. The cash flows over the project%u2019s four years are:

Expected Annual Expected Annual

Year Cash Inflows Cash Outflows

1 $30,000 $12,000

2 45,000 20,000

3 60,000 25,000

4 50,000 30,000

The cash payback period is

b. 3.35 years.

3. Jordan Company is considering the purchase of a machine with the following data:

Initial cost $130,000

One-time training cost 12,000

Annual maintenance costs 15,000

Annual cost savings 75,000

Salvage value 20,000

The cash payback period is

a. 2.37 years.

4. A company is considering purchasing a machine that costs $320,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used.

The cash payback period on the machine is

c. 5.2 years.