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Homework answers / question archive / Sunderland Wood Creations is considering a proposal to sell an existing lathe and purchase a new computeroperated lathe

Sunderland Wood Creations is considering a proposal to sell an existing lathe and purchase a new computeroperated lathe

Accounting

Sunderland Wood Creations is considering a proposal to sell an existing lathe and purchase a new computeroperated lathe. Information on the existing lathe and the computer-operated lathe follow:

 

Existing lathe

Computer-operated lathe

Cost

$100,000

$300,000

Accumulated depreciation

  60,000

       0

Salvage value now

  20,000

 

Salvage value in 4 years

       0

  60,000

Annual depreciation

  10,000

  75,000

Annual cash operating costs

 200,000

  50,000

Remaining useful life

 4 years

 4  years

 Refer to Sunderland Wood Creations. What is the payback period for the computer-operated lathe?

  1. 1.87  years
  2. 2.00  years
  3. 3.53  years
  4. 3.29  years

 

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