Exercise 10-13A (Algo) Determining the payback period with uneven cash flows LO 10-4Baird Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased onan annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Baird would sellit at the end of the fifth year of its useful life. The expected cash inflows and outflows follow:YearYear 1Year 1Year 2Year 3.Year 3.Year 4Year 5Year 5Nature of ItemPurchase price.RevenueRevenueRevenueMajor overhaulRevenueRevenueSalvage valueCash Inflow$31, 00031, 00026,00017,00015,0007,000Cash Outflow$79, 800a. Payback period (accumulated cash flows)b. Payback period (average cash flows)8, 200Requireda.&b. Determine the payback period using the accumulated and average cash flows approaches.Note: Round your answers to 1 decimal place.yearsyears Exercise 10-12A (Algo) Determining the payback period LO 10-4Munoz Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different usedairplanes. The first airplane is expected to cost $22,140,000; it will enable the company to increase its annual cash inflow by$5,400,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs$44,640,000; it will enable the company to increase annual cash flow by $9,300,000 per year. This plane has an eight-year useful lifeand a zero salvage value.Requireda1. Determine the payback period for each investment alternative.a2. Identify the alternative Munoz should accept if the decision is based on the payback approach.Note: Round your answers to 1 decimal place.a-1. Alternative 1 (First plane)a-1. Alternative 2 (Second plane)a-2. Munoz should acceptPayback PeriodyearsyearsO Show Transcribed TextExercise 10-8A (Algo) Determining the cash flow annuity with income tax considerations LO 10-2To open a new store, Finch Tire Company plans to invest $275,000 in equipment expected to have a five-year useful life and nosalvage value. Finch expects the new store to generate annual cash revenues of $320,000 and to incur annual cash operatingexpenses of $188,000. Finch's average income tax rate is 35 percent. The company uses straight-line depreciation.Year 1Year 2Year 3Year 4ÚRequiredDetermine the expected annual net cash inflow from operations for each of the first four years after Finch opens the new store.Note: Negative amounts should be indicated by a minus sign.Net cash Inflow or Outflow

It represents the period in which the initial cost of investment is recovered. It is estimated by…

Exercise 10-13A (Algo) Determining the payback period with uneven cash flows LO 10-4 Baird 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. Baird would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Cash Inflow Year Year 1 Year 1 Year 2 Year 3 Year 3 Year 4 Year 5 Year 5 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Salvage value $31,000 31,000 26,000 17,000 15,000 7,000 Cash Outflow $79, 800 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 8, 200 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. Note: Round your answers to 1 decimal place. years years

Exercise 10-13A (Algo) Determining the payback period with uneven cash flows LO 10-4 Baird 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. Baird would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Cash Inflow Year Year 1 Year 1 Year 2 Year 3 Year 3 Year 4 Year 5 Year 5 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Salvage value $31,000 31,000 26,000 17,000 15,000 7,000 Cash Outflow $79, 800 a. Payback period (accumulated cash flows) b. Payback period (average cash flows) 8, 200 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. Note: Round your answers to 1 decimal place. years years

Fundamentals of Financial Management (MindTap Course List)

15th Edition

ISBN:9781337395250

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 16P: REPLACEMENT CHAIN The Lesseig Company has an opportunity to invest in one of two mutually exclusive...

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