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You want to get approval for a capital expense to bring the copy service back in house. An investment of $24,000.00 for a dedicated computer and a new copy machine will support the ROI staff you already have. You estimate that it will bring in a cash income of $40,000.00 over the next 5 years. Your facility uses straight-line depreciation to calculate the average net income.

1. Use Table 6-32 to figure the rate of return on the NPV and Table 6-33 to determine the number of years it will take for the payback.

2. Then, use this formula to calculate the paybak period= INITIAL OUTLAY (investment)/Average Net Income=Payback Period

3. How many years will it take to pay back the investment?

Table 6-32: Net Present Value at 10.0%

Net Present Value at 10.0%

Years

Net Cash Flow

Factor for NPV at 10.0%

Present Value of Cash Flow

1

$2,000

$0.909091

2

$5,000

$0.826446

3

$9,000

$0.751315

4

$11,000

$0.683013

5

$13,000

$0.620921

Table 6-33: Payback Method of Evaluating the Capital Expense for the In-House Copy Service

Payback Method of Evaluating the Capital Expense for the In-House Copy Service

Year

Average Net Income

Initial Investment

Remaining

0

$24,000

1

2

3

4

5

6

Total

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