What is the payback period for the truck


Response to the following problem:

Lotus Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this years capital budget. The projects are independent. The firms cost of capital is 12%. The after tax cash flows, including depreciation, for the truck and the pulley are as follows:

Year          Truck         Pulley

0            -50000         -70000

1              10000          15000

2             10000            15000

3              10000           15000

4              10000           15000

5              10000           15000

6              10000            15000

7               10000           15000

a. What is the payback period for the truck?

b. What is the payback period for the pulley?

c. What is NPV for the truck?

d. What is NPV for the pulley?

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Financial Accounting: What is the payback period for the truck
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