Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

X Company must purchase a new delivery truck and is using the payback method to evaluate two possible trucks. Truck 1 costs $33,000; Truck 2

X Company must purchase a new delivery truck and is using the payback method to evaluate two possible trucks. Truck 1 costs $33,000; Truck 2 costs $49,000. The useful life of both is seven years, with the following estimated operating cash flows:

Year Truck 1 Truck 2
1 $-6,000 $-7,000
2 -8,000 -4,000
3 -8,000 -3,000
4 -8,000 -3,000
5 -6,000 -3,000
6 -5,000 -2,000
7 -4,000 -2,000

If X Company chooses Truck 2 instead of Truck 1, what is the payback period (in years)?

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

Fundamental financial accounting concepts

Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward

8th edition

978-007802536, 9780077648831, 0078025362, 77648838, 978-0078025365

More Books

Students also viewed these Accounting questions

Question

Why may some of a companys major assets not appear on the SFP?

Answered: 1 week ago