Dr. Barrett wants to purchase a new plece of equipment for his practice. The equipment can be purchased at a cost of $200,000 and has a useful life of 12 years. He thinks thatthe machine will generate $68,000 per year in revenue and the direct operating costs associated with earning this revenue will be $32,000. Depreclation expense per year will be$16,666.67. Compute the payback period using only CASH flows.Round your answer to two decimal places and use appropriate units.Answer

Payback period is a capital budgeting technique used to evaluate various investment proposals. It is…

Answered: ine will generate 568,000 per year in…

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ine will generate 568,000 per year in revenue and the direct o 7. Compute the payback period using only CASH flows.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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Dr. Barrett wants to purchase a new plece of equipment for his practice. The equipment can be purchased at a cost of $200,000 and has a useful life of 12 years. He thinks that
the machine will generate $68,000 per year in revenue and the direct operating costs associated with earning this revenue will be $32,000. Depreclation expense per year will be
$16,666.67. Compute the payback period using only CASH flows.
Round your answer to two decimal places and use appropriate units.
Answer

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