Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Requirement 1. Calculate the payback period and the discounted payback period for this investment, assuming Merganser expects to generate $165,000 in incremental revenues every year

image text in transcribedimage text in transcribedimage text in transcribed Requirement 1. Calculate the payback period and the discounted payback period for this investment, assuming Merganser expects to generate $165,000 in incremental revenues every year from the new machines. (Round your answer to two decimal places.) The payback period in years, for the investment assuming uniform net cash inflows is The discounted payback period in years, for the investment assuming uniform net cash inflows is Requirement 2. Assume instead that Merganser expects an uneven stream of incremental cash revenues from installing the new washing machines. Based on this estimated revenue stream, what are the payback and discounted payback periods for the investment? Start by determining the net initial investment unrecovered amounts at the end of each year by first entering the net cash inflow(outflow) amounts and then calculating the cumulative net cash flows for each year. (Use a minus sign or parentheses for net cash outflows and to show negative cumulative net cash flows. Once the net initial investment is fully recovered enter a zero for that year's line and for each subsequent year's line in the "net initial investment unrecovered at enc of year" column.) Using the table you completed above and straight-line interpolation, calculate the investment's payback. (Round your answer to two decimal places.) The payback period in years, for the investment assuming nonuniform net cash inflows is Now calculate the net initial investment unrecovered at the end of year with a discount by entering the appropriate amounts. (Use a minus sign or parentheses for net cash outflows and to show negative cumulative net cash flows. Round your answers to the nearest whole number.) Using the table previously completed, calculate the discounted payback for the investment. (Round your answer to two decimal places.) A. 5.74 B. 5.89 C. 5.49 D. 5.99 lerganser Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new high-efficiency rashing machines that will allow for the laundry's status to be checked via smartphone. Merganser estimates the cost of the new equipment at $203,000. The quipment has a useful life of 9 years. Merganser expects cash fixed costs of $77,000 per year to operate the new machines, as well as cash variable costs in the mount of 5% of revenues. Merrianser evaluates investments using a cost of capital of 8%. Requirements 1. Calculate the payback period and the discounted payback period for this investment, assuming Merganser expects to generate $165,000 in incremental revenues every year from the new machines. 2. Assume instead that Merganser expects an uneven stream of incremental cash revenues from installing the new washing machines. Based on this estimated revenue stream, what are the payback and discounted payback periods for the investment

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Unknown Market Wizards The Best Traders Youve Never Heard Of

Authors: Jack D. Schwager

1st Edition

0857198718, 978-0857198716

More Books

Students also viewed these Finance questions