Question - Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return
Wheeler Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $700,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow:
|
Year
|
Cash Revenues
|
Cash Expenses
|
|
1
|
$1,600,000
|
$1,000,000
|
|
2
|
1,600,000
|
1,000,000
|
|
3
|
1,600,000
|
1,000,000
|
|
4
|
1,600,000
|
1,000,000
|
|
5
|
1,600,000
|
1,000,000
|
Required: Compute the payback period for the NC equipment. Round your answer to one decimal place.