Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year 2018 Purchase price 2018 Revenue $ Nature of Item 2019 Revenue 2020 Revenue Major overhaul 2021 Revenue 2022 Revenue Salvage value 2020 2022 Cash Inflow 30,000 40,000 28,000 20,000 14,400 9,600 Cash Outflow $ 86,000 12,000 Required 1. a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.)

Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year 2018 Purchase price 2018 Revenue $ Nature of Item 2019 Revenue 2020 Revenue Major overhaul 2021 Revenue 2022 Revenue Salvage value 2020 2022 Cash Inflow 30,000 40,000 28,000 20,000 14,400 9,600 Cash Outflow $ 86,000 12,000 Required 1. a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 6CE

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