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X Company must purchase a new delivery truck and is using the payback method to evaluate two possible trucks. Truck 1 costs $31,000; Truck 2
X Company must purchase a new delivery truck and is using the payback method to evaluate two possible trucks. Truck 1 costs $31,000; Truck 2 costs $34,000. 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)?
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