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Category > Accounting Posted 29 Apr 2017 My Price 5.00

Determining the payback period with uneven cash flows

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 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

 

 

Required

  1. Determine the payback period using the accumulated cash flows approach.

  2. Determine the payback period using the average cash flows approach.

Answers

(8)
Status NEW Posted 29 Apr 2017 11:04 AM My Price 5.00

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Attachments

file 1493463759-1243742_1_636289845911239407_Pay-Back-cumulative-vs-Average.xlsx preview (160 words )
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