Bobwhite Laundromat is trying to enhance the services it provides to customers, mostly college students. It...
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Bobwhite Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new high-efficiency washing machines that will allow for the laundry's status to be checked via smartphone. Bobwhite estimates the cost of the new equipment at $178,000. The equipment has a useful life of 9 years. Bobwhite expects cash fixed costs of $87,000 per year to operate the new machines, as well as cash variable costs in the amount of 10% of revenues. Bobwhite evaluates investments using a cost of capital of 6%. Required 1. Calculate the payback period and the discounted payback period for this investment, assuming Bobwhite expects to generate $190,000 in incremental revenues every year from the new machines. 2. Assume instead that Bobwhite expects the following uneven stream of incremental cash revenues from installing the new washing machines: Home Insent Page Layout Formulas Data Review View A B E F G H 1 3 C 2 D 3 1 Year 1 4 5 6 7 8 9 2 Projected Revenue $85.000 $130,000 $140,000 $170,000 $180,000 $170,000 $140,000 $150,000 $185.000 Bobwhite Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new high-efficiency washing machines that will allow for the laundry's status to be checked via smartphone. Bobwhite estimates the cost of the new equipment at $178,000. The equipment has a useful life of 9 years. Bobwhite expects cash fixed costs of $87,000 per year to operate the new machines, as well as cash variable costs in the amount of 10% of revenues. Bobwhite evaluates investments using a cost of capital of 6%. Required 1. Calculate the payback period and the discounted payback period for this investment, assuming Bobwhite expects to generate $190,000 in incremental revenues every year from the new machines. 2. Assume instead that Bobwhite expects the following uneven stream of incremental cash revenues from installing the new washing machines: Home Insent Page Layout Formulas Data Review View A B E F G H 1 3 C 2 D 3 1 Year 1 4 5 6 7 8 9 2 Projected Revenue $85.000 $130,000 $140,000 $170,000 $180,000 $170,000 $140,000 $150,000 $185.000
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Cost of Equipment 178000 Life 9 years Fixed Cash Cost per year 80000 Variable Cost 15 of Revenues Co... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133428704
15th edition
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Posted Date:
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