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A machine can be purchased for $207,000 and used for five years, yielding the following net incomes. In projecting net incomes, double-declining depreciation is applied,
A machine can be purchased for $207,000 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 | $ | 16,500 | $ | 38,000 | $ | 62,000 | $ | 44,000 | $ | 116,000 | ||||||||||
Compute the machines payback period (ignore taxes). (Round payback period answer to 3 decimal places.)
Answer is complete but not entirely correct. Computation of Annual Depreciation Expense Annual Depr. (40% of Book Accumulated Depreciation at Year-End Beginning Ending Book Value Year Book Value 20124,200 132,480 74,520 44,712 26,827 16,099 Value 207,000 24,200 74,520 44,712 26,827 82,800 49,680 29,808 17,885 10,728 82,800 2 3 4 5 162,288 180,173 190,901 Annual Cash Flows Cumulative Cash Flow $ (207,000) 99,300(107,700) 87,680(20,020) 71,788 133,673 260,401 Net income Year Depreciation Net Cash Flow $ (207,000) 16,500 38,000 62,000 44,000 116,000 82,800 49,680 29,808 17,885 10,728 2 3 4 91,808 61,885 126,728 Payback period 2.218 yearsStep by Step Solution
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