1. Winter Corporation expects to buy a machine for $126,000, which will be depreciated over an 8 year period on a straight-line basis with no salvage value. The machine is expected to generate a net cash flow of $36,000 per year. What is the payback period?
2. If credit sales are $20,000 in March and $16,000 in April, and if 80% are collected in the month of sale while 20% are collected in the following month, what are April collections?
Cost of Machine = 126,000
Useful Life = 8 years
Salvage Value = 0
Depreciation Per Year = 126,000/8 = 15,750
There is no information given about the interest rate. ...
The solution answers questions related to NPV and Payback period.