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Campbell Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual

Campbell Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Campbell would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow:

Year Nature of item Cash Inflow Cash outflow
2018 Purchase price $82,600
2018 Revenue $32,000
2019 Revenue 32,000
2020 Revenue 27,000
2020 Major overhaul 8,400
2021 Revenue 18,000
2022 Revenue 16,000
2022 Salvage value 7,200

Determine the payback period using the accumulated and average cash flows approaches.

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