Exercise 24-4 Payback period; accelerated depreciation LO P1

A machine can be purchased for $233,000 and used for five years, yielding the following net incomes. In projecting net incomes, double-declining depreciation is applied, using a five-year life and a zero salvage value.

	Year 1				Year 2				Year 3				Year 4				Year 5
Net income		$	19,500			$	44,000			$	51,000			$	52,500			$	121,000

Compute the machines payback period (ignore taxes). (Round payback period answer to 3 decimal places.)

Computation of Annual Depreciation Expense
Year	Beginning Book Value	Annual Depr. (40% of Book Value)	Accumulated Depreciation at Year-End	Ending Book Value
1
2
3
4
5
Annual Cash Flows
Year	Net income	Depreciation	Net Cash Flow	Cumulative Cash Flow
0	$(233,000)			$(233,000)
1	19,500
2	44,000
3	51,000
4	52,500
5	121,000
Payback period =					years