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Question 1 The Pina Colada Company is planning to purchase $504,500 of equipment with an estimated seven-year life and no estimated salvage value. The company
Question 1 The Pina Colada Company is planning to purchase $504,500 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment. Year Projected Cash Flows 1 $184,500 2 151,500 3 106,500 4 74,400 5 74,400 6 45,500 7 45,500 Total $682,300
(a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year.
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