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Vandezande Inc. is considering the acquisition of a new machine that costs $364,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.): Incremental Net Operating Income Incremental Net Cash Flows Year 1 $ 71,000 $ 150,000 Year 2 $ 77,000 $ 156,000 Year 3 $ 88,000 $ 175,000 Year 4 $ 51,000 $ 153,000 Year 5 $ 93,000 $ 155,000 Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period of this investment is closest to: (Round your answer to 1 decimal place.)

Answer :

tanseershar

Answer:

2.33 years

Explanation:

Cashflows (150,000+156,000+175,000+153,000+155,000)=$789,000

Period  Cashflow  Difference

0    -364,000

1     150,000     -214,000

2    156,000     -58,000

3    175,000       117,000

Formula for payback=A+(B/C)

Where A=Last period where negative cumulative cash flow occurred

B=Differential negative amount of previous period (taken as positive in formula)

C=Positive amount for the whole next year

A= 2 year

B=58,000

C=175,000

Payback period=2+(58,000/175,000)=2.3 years

Answer:

2.3years

Explanation:

The table attached shows the explanation

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