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Swifty’s Accounting Museum is exploring the purchase of a new building with a useful life of 20 years to use as its main gallery space. The building will cost $1,369,200. Once it has been purchased, the museum will terminate its current lease, which costs $69,000 per year. The new gallery will allow the museum to display more of its permanent collection, as well as to showcase traveling exhibits. The increased exhibit space, along with the new building’s location, is expected to increase admissions revenue by $28,800 per year.Calculate the payback period for the proposed investment in the building. Assume that all cash flows occur evenly throughout the year. (Round answer to 0 decimal places, e.g. 5,275.)Payback period   years  Click if you would like to Show Work for this question:

Question
Swifty’s Accounting Museum is exploring the purchase of a new building with a useful life of 20 years to use as its main gallery space. The building will cost $1,369,200. Once it has been purchased, the museum will terminate its current lease, which costs $69,000 per year. The new gallery will allow the museum to display more of its permanent collection, as well as to showcase traveling exhibits. The increased exhibit space, along with the new building’s location, is expected to increase admissions revenue by $28,800 per year.

Calculate the payback period for the proposed investment in the building. Assume that all cash flows occur evenly throughout the year. (Round answer to 0 decimal places, e.g. 5,275.)

Payback period  
 
 years
 

 

Click if you would like to Show Work for this question:  
check_circleAnswer
Step 1

Calculate the total savings per year:

Given:

Cost of the building is $1,369,200

Savings from the termination of current lease is $69,000

Increase in revenue is $28,000

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Step 2

Calculate the payback period for the proposed investment in the building:

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Step 3

Workings for calculating t...

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