U Work jor full or partial credit rate is 9%. The cash flo company is considering the purchase of a manufacturing equipment. Interes 15 9 The cash flow for the equipment are as follows: Initial cost $55 ,000, annual operating cost $2200, annual income $8.000, an fe I
Expert Answer
Net income per year = 8000 – 2200 = 5800
Annual cash flow = 5800 – (55000*.09) + (55000-15000/10) = 4850
Payback period = 55000/4850 = 11.3 years
Not feasible as it exceeds the life of the machine.