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25 May, 19:13

The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment:

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  1. 25 May, 20:07
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    Complete question:

    Year Income from Operations Net Cash Flow

    1 $18,750 $93,750

    2 18,750 93,750

    3 18,750 93,750

    4 18,750 93,750

    5 18,750 93,750

    Answer and Explanation:

    The cash payback period: (the period in which the full initial payment will be paid)

    Initial payment/annual net cash flow

    375,000/93750 = 4 years.
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