QUESTION 6 10 points Save Answer A piece of machinery has an

QUESTION 6 10 points Save Answer A piece of machinery has an initial cost of $70,000, M&O; costs of $2,000 per year, revenue of $12,000 per year, and an indefinite life. If MARR-896, the machine will pay for itself in approximately how many years? a 9 years b. 11 years C. None of these numerical values d. 8 years e. 10 years Oc.

Solution

Year Net cash inflws PVF @ 8% Present Value Cumulative CF 0 -70000 1 -70000 -70000 1 10000 0.925926 9259.259 -60740.7 2 10000 0.857339 8573.388 -52167.4 3 10000 0.793832 7938.322 -44229 4 10000 0.73503 7350.299 -36878.7 5 10000 0.680583 6805.832 -30072.9 6 10000 0.63017 6301.696 -23771.2 7 10000 0.58349 5834.904 -17936.3 8 10000 0.540269 5402.689 -12533.6 9 10000 0.500249 5002.49 -7531.12 10 10000 0.463193 4631.935 -2899.19 11 10000 0.428883 4288.829 1389.643 Payback period: 10 years +2899 /4289 = 10.68 years Answer is b. 11 years