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c 1B

Financial and Managerial Accounting

Chapter 24

1.Exercise 24-1 Payback period computation; even cash flows L.O. P1

Compute the payback period for each of these two c:
a. A new operating system for an existing machine is expected to cost $260,000 and have a useful life of five years. The system yields an incremental after-tax income of $75,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000.(Round your answer to 2 decimal places.)
Payback period
b. A machine costs $190,000, has a $10,000 salvage value, is expected to last nine years, and will generate an after-tax income of $30,000 per year after straight-line depreciation.(Round your answer to 1 decimal place.)
Payback period


Exercise 24-2 Payback period computation; uneven cash flows L.O. P1

Wenro Company is considering the purchase of an asset for $90,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year.

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Year 1 Year 2 Year 3 Year 4 Year 5 Total
Net cash flows $ 30,000 $ 20,000 $ 30,000 $ 60,000 $ 19,000 $ 159,000