The management of Retz Corporation is considering the purchase of a new machine costing $500,000.The company's desired rate of return is 10%.The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively.In addition to the foregoing information, use the following data in determining the acceptability in this situation:? $$\begin{array} { c c c }
\text { Year } & \text { Income from Operations } & \text { Net Cash Flow } \
\hline 1 & \$ 100,000 & \$ 200,000 \
2 & 80,000 & 170,000 \
3 & 50,000 & 130,000 \
4 & 10,000 & 80,000 \
5 & 10,000 & 80,000
\end{array}$$ ? The cash payback period for this investment is:

Question

The management of Retz Corporation is considering the purchase of a new machine costing $500,000.The company's desired rate of return is 10%.The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively.In addition to the foregoing information, use the following data in determining the acceptability in this situation:? $$\begin{array} { c c c } 
\text { Year } & \text { Income from Operations } & \text { Net Cash Flow } \
\hline 1 & \$ 100,000 & \$ 200,000 \
2 & 80,000 & 170,000 \
3 & 50,000 & 130,000 \
4 & 10,000 & 80,000 \
5 & 10,000 & 80,000
\end{array}$$ ? The cash payback period for this investment is:

Quizplus · Accepted Answer

The cash payback period is calculated by adding the net cash flows year by year until the total investment of $500,000 is recovered. From the given data: Year 1 + Year 2 = $200,000 + $170,000 = $370,000. Adding Year 3's net cash flow of $130,000 gives a total of $500,000, which recovers the investment by the end of Year 3.

The Management of Retz Corporation Is Considering the Purchase of a New