Exercise 251 Payback period computation; uneven cash flows LO P1
Beyer Company is considering the purchase of an asset for $360,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. 

Year 1 
Year 2 
Year 3 
Year 4 
Year 5 
Total 
Net cash flows 

$ 
80,000 


$ 
50,000 


$ 
70,000 


$ 
250,000 


$ 
13,000 


$ 
463,000 



























Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your answers to 2 decimal places.)
A machine can be purchased for $210,000 and used for 5 years, yielding the following net incomes. In projecting net incomes, doubledeclining balance depreciation is applied, using a 5year life and a zero salvage value. 

Year 1 
Year 2 
Year 3 
Year 4 
Year 5 
Net incomes 

$ 
13,000 


$ 
28,000 


$ 
53,000 


$ 
40,500 


$ 
103,000 























Compute the machine’s payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and payback period answer to 3 decimal places.)
Exercise 253 Payback period computation; even cash flows LO P1
Compute the payback period for each of these two separate investments: 
a. 
A new operating system for an existing machine is expected to cost $240,000 and have a useful life of four years. The system yields an incremental aftertax income of $69,230 each year after deducting its straightline depreciation. The predicted salvage value of the system is $9,000. 
b. 
A machine costs $180,000, has a $13,000 salvage value, is expected to last seven years, and will generate an aftertax income of $38,000 per year after straightline depreciation. 
Exercise 254 Accounting rate of return LO P2
A machine costs $300,000 and is expected to yield an aftertax net income of $9,000 each year. Management predicts this machine has a 9year service life and a $60,000 salvage value, and it uses straightline depreciation. Compute this machine’s accounting rate of return. (Round your answer to 2 decimal places.)
Exercise 255 Payback period and accounting rate of return on investment LO P1, P2
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $480,000 with a 12year life and no salvage value. It will be depreciated on a straightline basis. The company expects to sell 192,000 units of the equipment’s product each year. The expected annual income related to this equipment follows. 




Sales 
$ 
300,000 

Costs 



Materials, labor, and overhead (except depreciation) 

160,000 

Depreciation on new equipment 

40,000 

Selling and administrative expenses 

30,000 





Total costs and expenses 

230,000 





Pretax income 

70,000 

Income taxes (30%) 

21,000 





Net income 
$ 
49,000 





Exercise 256 Computing net present value LO P3
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $368,000 with a 4year life and no salvage value. It will be depreciated on a straightline basis. K2B Co. concludes that it must earn at least a 8% return on this investment. The company expects to sell 147,200 units of the equipment’s product each year. The expected annual income related to this equipment follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) 




Sales 
$ 
230,000 

Costs 



Materials, labor, and overhead (except depreciation) 

81,000 

Depreciation on new equipment 

92,000 

Selling and administrative expenses 

23,000 





Total costs and expenses 

196,000 





Pretax income 

34,000 

Income taxes (30%) 

10,200 





Net income 
$ 
23,800 






Compute the net present value of this investment. (Round “PV Factor” to 4 decimal places. Round your intermediate calculations and final answer to the nearest dollar amount.) 


