Exercise 10-13A (Algo) Determining the payback period with uneven cash flows LO 10-4 Baird 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. Baird would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Year 1 Nature of Item Cash Inflow Purchase price Cash Outflow $79,800 Revenue $31,000 Year 2 Revenue 31,000 Year 3 Revenue 26,000 Year 3 Major overhaul 8,200 Year 4 Revenue 17,000 Year 5 Year 5 Revenue 15,000 Salvage value 7,000 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. Note: Round your answers to 1 decimal place. a. Payback period (accumulated cash flows) b. Payback period (average cash flows) years years Exercise 10-12A (Algo) Determining the payback period LO 10-4 Munoz Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $22,140,000; it will enable the company to increase its annual cash inflow by $5,400,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $44,640,000; it will enable the company to increase annual cash flow by $9,300,000 per year. This plane has an eight-year useful life and a zero salvage value. Required a1. Determine the payback period for each investment alternative. a2. Identify the alternative Munoz should accept if the decision is based on the payback approach. Note: Round your answers to 1 decimal place. a-1. Alternative 1 (First plane) a-1. Alternative 2 (Second plane) a-2. Munoz should accept Payback Period years years Exercise 10-8A (Algo) Determining the cash flow annuity with income tax considerations LO 10-2 To open a new store, Finch Tire Company plans to invest $275,000 in equipment expected to have a five-year useful life and no salvage value. Finch expects the new store to generate annual cash revenues of $320,000 and to incur annual cash operating expenses of $188,000. Finch's average income tax rate is 35 percent. The company uses straight-line depreciation. Required Determine the expected annual net cash inflow from operations for each of the first four years after Finch opens the new store. Note: Negative amounts should be indicated by a minus sign. Year 1 Year 2 Year 3 Year 4 Net cash Inflow or Outflow