Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business.

Question:

Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow:
Year _____ Nature of Item _____________ Cash Inflow ______ Cash Outflow
2018.................... Purchase price........................................... $86,000
2018.................... Revenue....................... $30,000
2019.................... Revenue........................ 40,000
2020.................... Revenue........................ 28,000
2020................... Major overhaul............................................ 12,000
2021.................... Revenue........................ 20,000
2022.................... Revenue........................ 14,400
2022.................... .................... 9,600
Required
a. Determine the using the accumulated cash flows approach.
b. Determine the using the average cash flows approach. Round your computation to one decimal point.
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