keslea
Jun 5, 2010, 12:26 PM
Hi, I am working on a project and I am confused about how to complete my project. The following is an example similar to my project which provides me with a solution manual. I am trying to figure out the calculation of the Payback period.
Cost of new equipment $200,000
Expected life of equipment in years 5
Disposal value in 5 years $40,000
Life production - number of cans 10,000,000
Annual production or purchase needs 1,000,000
Initial training costs 10,000
Number of workers needed 3
Annual hours to be worked per employee 2300
Earnings per hour for employees $8.50
Annual health benefits per employee $1,500
Other annual benefits per employee-% of wages 18%
Cost of raw materials per can $0.20
Other variable production costs per can $0.10
Costs to purchase cans - per can $0.50
Required rate of return 10%
Tax rate 35%
Answer Payback Period: 200,000+10,000/87690 = 2.4 years
I don't understand were the 10,000 comes from in the investment. I am guessing the initial training costs? I am not great with numbers, someone please help.
Cost of new equipment $200,000
Expected life of equipment in years 5
Disposal value in 5 years $40,000
Life production - number of cans 10,000,000
Annual production or purchase needs 1,000,000
Initial training costs 10,000
Number of workers needed 3
Annual hours to be worked per employee 2300
Earnings per hour for employees $8.50
Annual health benefits per employee $1,500
Other annual benefits per employee-% of wages 18%
Cost of raw materials per can $0.20
Other variable production costs per can $0.10
Costs to purchase cans - per can $0.50
Required rate of return 10%
Tax rate 35%
Answer Payback Period: 200,000+10,000/87690 = 2.4 years
I don't understand were the 10,000 comes from in the investment. I am guessing the initial training costs? I am not great with numbers, someone please help.