Becker industries is considering investing in new navigation system equipment for it trucking fleet.

CHAPTER 10 - Journal Exercise Capital Budgeting Decisions Payback Period: Measure the time it takes to recoup an investment. EXERCISE 1: Becker Industries is considering investing in new navigation system equipment for its trucking fleet. The initial investment is $180,000 and is expected to result in unequal net cash flows over the next 8 years. The equipment is expected to have a salvage value of $20,000 at the end of its useful tife. Calculate the Payback period assuming the following net cash inflows: Year Amount invested Net Cash Inflows Accumulated 0 $180,000 1 $35,000 2 35,000 3 35,000 30,000 30,000 30,000 30,000 25,000 Salvage Value 20,000 TOTAL $270,000 $ 4 5 6 7 8 Payback occurs somewhere between years average of cash flows. and You can also calculate Payback using the $ Total cash inflows Divide by: 8 Average Amount Invested 78 $ S Net Cost of Investment Divide by: Average Amount Invested (ABOVE) Payback (round to two places beyond the decimal. 0.00) years