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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Determining the payback period with uneven cash flows
Melton Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Melton would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow. 
|
Year 2012 |
Nature of Item Purchase price |
Cash Inflow |
Cash Outflow $72,000 |
|
2012 |
Revenue |
$30,000 |
 |
|
2013 |
Revenue |
30,000 |
 |
|
2014 |
Revenue |
21,000 |
 |
|
2014 |
Major overhaul |
 |
9,000 |
|
2015 |
Revenue |
18,000 |
 |
|
2016 |
Revenue |
14,400 |
 |
|
2016 |
Salvage value |
9,600 |
 |
Required
Determine the payback period using the accumulated cash flows approach.
Determine the payback period using the average cash flows approach.
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