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Question: You have the opportunity to expand your

You have the opportunity to expand your business b y purchasing new equipment for $189,000. You expect to incur fixed costs of $96,000 per year to use this new equipment, and you expect to incur variable costs in the amount of approximately 10% of annual revenues. Required: 1. Calculate the payback period for this investment assuming you will generate $140,000 in cash revenues every year. 2. Assume you expect the following revenue stream for this investment
You have the opportunity to expand your business b y purchasing new equipment for $189,000. You expect to incur fixed costs of $96,000 per year to use this new equipment, and you expect to incur variable costs in the amount of approximately 10% of annual revenues.

Required:
1. Calculate the payback period for this investment assuming you will generate $140,000 in cash revenues every year.
2. Assume you expect the following revenue stream for this investment


Based on this estimated revenue stream, what is the payback period for this investment?

Based on this estimated revenue stream, what is the payback period for this investment?





Transcribed Image Text:

Year 1:$ 90,000 Year 4: $155,000 Year 7: $140,000 Year 2: 115,000 Year 5: 170,000 Year 8: 125,000 Year 3: 130,000 Year 6: 180,000 Year 9: 80,000


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