Birch manufacturing is considering the addition of another product line to its offerings.Equipment needed to produce the new line will cost $200,000.Birch estimates that the net annual cash inflows from the new product line will be as follows: Required:
a.What is the payback period for the new product line?
b.If the company can establish a steady customer base before production starts and the cash inflows will be $15,000 per year for years 1 - 15, with years 16 through 20 remaining at $2,000 annually, what will be the payback period?

Question

Birch manufacturing is considering the addition of another product line to its offerings.Equipment needed to produce the new line will cost $200,000.Birch estimates that the net annual cash inflows from the new product line will be as follows:  Required: 
a.What is the payback period for the new product line?
b.If the company can establish a steady customer base before production starts and the cash inflows will be $15,000 per year for years 1 - 15, with years 16 through 20 remaining at $2,000 annually, what will be the payback period?

Quizplus · Accepted Answer

The Answer of Birch manufacturing is considering the addition of another product line to its offerings.Equipment needed to produce the new line will cost $200,000.Birch estimates that the net annual cash inflows from the new product line will be as follows:  Required: 
a.What is the payback period for the new product line?
b.If the company can establish a steady customer base before production starts and the cash inflows will be $15,000 per year for years 1 - 15, with years 16 through 20 remaining at $2,000 annually, what will be the payback period?

Birch Manufacturing Is Considering the Addition of Another Product Line