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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