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You have the opportunity to expand your business by purchasing new equipment for $152,000. The...

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Accounting

You have the opportunity to expand your business by purchasing new equipment for $152,000.

The equipment has a useful life of 9 years. You expect to incur cash fixed costs of $79,000 per year to use this new equipment, and you expect to incur cash variable costs in the amount of 5% of annual revenues. Your cost of capital is 6%.

Required:

1.

Assume instead you expect a cash revenue stream for this investment.

Based on this estimated revenue stream,

Year 1 $ 105,000

Year 2 115,000

Year 3 110,000

Year 4 90,000

Year 5 160,000

Year 6 150,000

Year 7 160,000

Year 8 110,000

Year 9 160,000

What are the payback and discounted payback periods for this investment?

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