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The Bridgeport Company is planning to purchase $598,700 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the
The Bridgeport Company is planning to purchase $598,700 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 $ 256,400 1 N 151,400 2 3 118,800 4 61,800 5 61,800 6 41,700 7 41,700 Total $ 733,600 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. Payback period 4 years and 5 months. (b) If Bridgeport requires a payback period of 4 years or less, should the company make this investment? The company should not make this investment
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