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The Swifty Company is planning to purchase $617,500 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the
The Swifty Company is planning to purchase $617,500 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 1 2 3 4 5 6 7 Total Projected Cash Flows $221,000 Payback period 171,100 126,400 The company 79,200 79,200 57,000 57,000 (a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. $790,900 years and (b) If Swifty requires a payback period of 4 years or less, should the company make this investment? months. make this investment.
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