Question
Bob Jensen incorporated purchased a $600,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next
Bob Jensen incorporated purchased a $600,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. The machine is expectto have a 10 year useful life with no salvage value. Jensen uses straight- line depreciation. The net cash inflow is expected to be $138,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity that MACRS depreciation rules do not apply. Required: The present value payback period in years of the proposed investment under the assumption that cash inflows occur evenly throughout the year. (Note: because of this assumption, the present value calculations will be approximate, not exact.) Do not round intermediate calculations. Round your final answer to 1 decimal place.
Step 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