Oriental Corporation has gathered the following data on a proposed investment project:Investment in depreciable equipmentAnnual net cash flowsLife of the equipment$600,000$ 64,00015 yearsSalvage valueDiscount rate6%The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment.The payback period for the investment would be: (Round your answer to 1 decimal place.) The payback period for the investment would be: (Round your answer to 1 decimal place.)Multiple Cholce0.1 years1.0 years7.4 years9.4 years

Capital budgeting: capital budgeting is a decision-making method done by management accountants in…

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The payback period for the investment would be: (Ro

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15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 14E

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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.

Question

Oriental Corporation has gathered the following data on a proposed investment project:
Investment in depreciable equipment
Annual net cash flows
Life of the equipment
$600,000
$ 64,000
15 years
Salvage value
Discount rate
6%
The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period for the investment would be: (Round your answer to 1 decimal place.)

The payback period for the investment would be: (Round your answer to 1 decimal place.)
Multiple Cholce
0.1 years
1.0 years
7.4 years
9.4 years

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