Jordan Company is considering the purchase of a machine with the following dа ta:

Initial cost $150,000

One-time training cost 12,000

Annual maintenance costs 15,000

Annual cost savings 75,000

Salvage value 20,000

The cash payback period is

A) 2.70 years.

B) 2.50 years.

C) 2.37 years.

D) 2.17 years

Question

Rowland

Business

9 September, 02:19

Jordan Company is considering the purchase of a machine with the following dа ta:

Initial cost $150,000

One-time training cost 12,000

Annual maintenance costs 15,000

Annual cost savings 75,000

Salvage value 20,000

The cash payback period is

A) 2.70 years.

B) 2.50 years.

C) 2.37 years.

D) 2.17 years

+1

Answers (1)

Know the Answer?

Bria Holder · Answer 1

Option (A) is correct.

Explanation:

Given that,

Initial cost = $150,000

One-time training cost = 12,000

Annual maintenance costs = 15,000

Annual cost savings = 75,000

Salvage value = 20,000

Cash payback period = Initial Investment : Net annual cash inflows

= [ ($150,000 + $12,000) : ($75,000 - $15,000) ]

= $162,000 : $60,000

= 2.7 years

Jordan Company is considering the purchase of a machine with the following dа ta:Initial cost $150,000One-time training cost 12,000Annual maintenance costs 15,000Annual cost savings 75,000Salvage value 20,000The cash payback period isA) 2.70 years.B) 2.50 years.C) 2.37 years.D) 2.17 years