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

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Benson Company Has An Opportunity To Purchase A Forklift To Use In Its Heavy Equipment Rental Business The Forklift Wou 1 (157.99 KiB) Viewed 36 times

Benson 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. Benson would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow: Year Year 1 Year 1 Year 2 Year 3 Year 3 Year 4 Year 5 Year 5 Nature of Item Purchase price Revenue Revenue Revenue Major overhaul Revenue Revenue Salvage value Cash Inflow a. Payback period (accumulated cash flows) b. Payback period (average cash flows) $31,500 31,500 26,500 17,500 15,500 7,100 Cash Outflow $81,200 Required a.&b. Determine the payback period using the accumulated and average cash flows approaches. (Round your answers to 1 decimal place.) 8,300 years years