Paramount Carpets Company is considering purchasing new equipment costing $700,000.The company's management has estimated that the equipment will generate cash flows as follows: Considering the residual value is zero,calculate the payback period.

Question

Paramount Carpets Company is considering purchasing new equipment costing $700,000.The company's management has estimated that the equipment will generate cash flows as follows:  Considering the residual value is zero,calculate the payback period.

Quizplus · Accepted Answer

11ea84d1_1196_ad02_83dc_af874ae36806_TB3006_00 Payback = 3 years + [($700,000 ? $650,000)÷ $250,000] = 3.2 years

Paramount Carpets Company Is Considering Purchasing New Equipment Costing $700,000