Runnin' Wild Family Fun Center bought new go-karts for its recreation facility. The useful life is 6 years. The go-karts had a t

Question

11 days ago

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Runnin' Wild Family Fun Center bought new go-karts for its recreation facility. The useful life is 6 years. The go-karts had a t

otal cost of $5,100 and will generate $1,700 total cash inflows each year for the life of the go-karts. The residual value of the go-karts is $650. The payback period in years is closest to
A) 3.38.B) 3.00.C) 2.62.D) 2.17.

Business

1 answer:

arsen [3.2K] · Answer 1 · 2026-03-28T15:37:28+03:00

Answer:

The payback period is approximately;

B). 3.00

Explanation:

Step 1: Identify the total expense of the go-kart

Using the formula;

Total cost = purchase cost + annual depreciation × number of years

where;

purchase cost = $5,100

assume annual depreciation = 0

the years to recoup = n

Inserting values, we get;

Total cost = 5,100 + (0 × n) = 5,100

Step 2: Total cash inflows

Total cash inflows = (1,700 × n) = 1,700n

Step 3: Determine the payback duration

Setting total expense equal to total cash inflow

5,100 = 1,700n

n = 5,100/1,700

n = 3

The payback timeframe in years is therefore approximately 3 years