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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
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 life. Calculate the Payback Period assuming the following net cash inflows: Year Amount Invested Net Cash Inflows Accumulated $180,000 $35,000 35,000 1 35,000 4 30,000 30,000 30,000 30,000 7 8 25,000 Salvage Value 20,000 $270,000 TOTAL You can also calculate Payback using the Payback occurs somewhere between years and average of cash flows Total cash inflows Divide by: 8 /8 Average Amount Invested Net Cost of Investment $ Divide by: Average Amount Invested (ABOVE) Payback (round to two places beyond the decimal. 0.00) years
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