Managerial Accounting 1B Ch24

Compute the payback period for
each of these two separate investments:

a.

A new operating system for an existing
machine is expected to cost $260,000 and have a useful life of five years.
The system yields an incremental after-tax income of $75,000 each year after
deducting its straight-line depreciation. The predicted salvage value of the
system is $10,000.(Round your answer to 2
decimal places.)

Payback period

b.

A machine costs $190,000, has a
$10,000 salvage value, is expected to last nine years, and will generate an
after-tax income of $30,000 per year after straight-line depreciation.(Round your answer to 1 decimal place.)

Payback period

Wenro Company is considering the
purchase of an asset for $90,000. It is expected to produce the following net
cash flows. The cash flows occur evenly throughout each year.

Year
1

Year
2

Year
3

Year
4

Year
5

Total

Net cash flows

$

30,000

$

20,000

$

30,000

$

60,000

$

19,000

$

159,000

Compute the payback period for
this investment. (Round your intermediate
calculations to 3 decimal places and final answer to 1 decimal place.)

Payback period

A machine can be purchased for
$300,000 and used for 5 years, yielding the following net incomes. In
projecting net incomes, double-declining balance depreciation is applied,
using a 5-year life and a $50,000 salvage value.

Year
1

Year
2

Year
3

Year
4

Year
5

Net incomes

$

20,000

$

50,000

$

100,000

$

75,000

$

200,000

Compute the machine’s payback
period (ignore taxes). (Round your
intermediate calculations to 3 decimal places and final answer to 2 decimal
places.)

Payback period