Answered step by step
Verified Expert Solution
Question
1 Approved Answer
answer the following question cash inflows of $9,000 for each of the next 7 years. The second machine requires an initial investment of $29,000 and
answer the following question
cash inflows of $9,000 for each of the next 7 years. The second machine requires an initial investment of $29,000 and provides an annual cash inflow of $5,000 for 28 years. a. Determine the payback period for each machine. b. Comment on the acceptability of the machines, assuming that they are independent projects c. Which machine should the firm buy? Why? d. Does this problem illustrate any of the payback method's weaknesses? a. The payback period for the first machine is years. (Round to two decimal places.) The payback period for the second machine is years. (Round to two decimal places.) b. Is the first machine acceptable? (Select the best answer below.) No Yes Is the second machine acceptable? (Select the best answer below.) No Yes Based on their payback periods, which machine should the firm accept? (Select the best answer below.) A. Machine 2 B. Neither C. Machine 1 d. Does this problem illustrate any of the payback method's weaknesses? (Select the best answer below.) A. Machine 2 has returns that last 28 years while Machine 1 has only 7 years of returns. Payback considers this difference; it includes all cash inflows beyond the payback period. D. Machine 2 has returns that last 28 years while Machine 1 has only 7 years of returns. Payback considers only the first 7 years for each machineStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started