A company is considering the purchase of a new piece of equipment that costs $50,500 and will have a salvage value of $5,050 after 9 years. Using the new piece of equipment will increase annual cash flows by $6,050. Required: a. What is the payback period for the new piece of equipment? b. Suppose that the increase in cash flows was $10,050 in the first year, then decreased by $1,000 each year over the life of the equipment. What is the payback period for the equipment? Complete this question by entering your answers in the tabs below. Required A Required B What is the payback period for the new piece of equipment? Note: Round your answer to 2 decimal places.
A company is considering the purchase of a new piece of equipment that costs $50,500 and will have a salvage value of $5,050 after 9 years. Using the new piece of equipment will increase annual cash flows by $6,050. Required: a. What is the payback period for the new piece of equipment? b. Suppose that the increase in cash flows was $10,050 in the first year, then decreased by $1,000 each year over the life of the equipment. What is the payback period for the equipment? Complete this question by entering your answers in the tabs below. Required A Required B What is the payback period for the new piece of equipment? Note: Round your answer to 2 decimal places.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section10.A: Mutually Exclusive Investments Having Unequal Lives
Problem 2P
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