Question
Calculate the payback period for keeping the old backhoes and purchasing the new backhoes. Old Backhoes New Backhoes Purchase cost when new $90,000 $200,000 Salvage
Calculate the payback period for keeping the old backhoes and purchasing the new backhoes.
Old Backhoes | New Backhoes | ||
Purchase cost when new | $90,000 | $200,000 | |
Salvage value now | $42,000 | ||
Investment in major overhaul needed in next year | $55,000 | ||
Salvage value in 8 years | $15,000 | $90,000 | |
Remaining life | 8 years | 8 years | |
Net cash flow generated each year | $40,425 | $53,900 |
Step by Step Solution
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Step 1 Meaning of Net Present Value Net present valueNPV is the difference between the PV of cash inflows and the PV of cash outflows over a period of time It is used in capital budgeting and investme...
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Intermediate Accounting
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
10th Edition
324300980, 978-0324300987
