A company is considering the purchase of equipment for $400,000, with a useful life of 8 years and no residual values expected to yleld the following annual net incomes and net cash flows Year Net Income Net Cash Flow 1 $90,000 $110,000 2 90

Accounting Dec 03, 2020

A company is considering the purchase of equipment for $400,000, with a useful life of 8 years and no residual values expected to yleld the following annual net incomes and net cash flows Year Net Income Net Cash Flow 1 $90,000 $110,000 2 90.000 100,000 3 80,000 100,000 4 70,000 80,000 5 70,000 90,000 6 80,000 90.000 7 80,000 90,000 8 70.000 90,000 What is the cash payback period? Multiple Choice 4.25 years

Expert Solution

Year	Cash flows	Cumulative Cash flows
0	-400000	-400000
1	110000	-290000
2	100000	-190000
3	100000	-90000
4	80000	-10000
5	90000	80000

Cash payback period	4.11 years	=4+(10000/90000)

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