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The Culver Company is planning to purchase $568,000 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the
The Culver Company is planning to purchase $568,000 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 $210,000 1 2 159,500 3 114,500 4 72,000 72,000 6 41,500 7 41,500 Total $711,000 (a) Calculate the payback period for proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. Payback period years and months. (b) If Culver requires a payback period of 4 years or less, should the company make this investment? The company make this investment
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