Question

Accelerated Finance is deciding whether to purchase new accounting software. The cost of the software package is $ 66,000​, and its expected life is ten years. The payback for this investment is four years. Assuming equal yearly cash​ inflows, what are the expected annual net cash savings from the new​ software? (Assume the investment has no residual​ value.)

Answer 1

Answer: The expected annual net cash savings from the new​ software is $16500.

Step-by-step explanation:

Given that,

Cost of the software package = $ 66,000

Expected life = 10 years

Investment Payback = 4 years

Salvage value = 0

Payback period =
`(Initial\ Investment - Salvage\ Vaue)/(Annual\ cash\ inflow)`

4 =
`(66000 - 0)/(Annual\ cash\ inflow)`

Annual cash inflow =
`(66000)/(4)`

= 16500

∴ The expected annual net cash savings from the new​ software is $16500.