Determine the payback period (in years, round-off to 5 decimal places) at an interest rate of 7% per year for an asset that initially cost $30,000, has a scrap value of $1,700 whenever it is sold, and generates cash flow of $3,100 per year.

Determine the payback period (in years, round-off to 5 decimal places) at an interest rate of 7% per year for an asset that initially cost $30,000, has a scrap value of $1,700 whenever it is sold, and generates cash flow of $3,100 per year.

Managerial Accounting

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 4BE: Internal rate of return A project is estimated to cost 463,565 and provide annual net cash flows of...

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

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