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bachelor in business administration
Polytechnic State University Sanluis
Jan-2006 - Nov-2010
CPA
Polytechnic State University
Jan-2012 - Nov-2016
Professor
Harvard Square Academy (HS2)
Mar-2012 - Present
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.
Â
|
Year 2012 |
Nature ofItem Purchase price |
Cash Inflow |
CashOutflow $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 |
 |
Â
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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