Currie Company has an opportunity to purchase a forklift to

Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Currie would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow:

Year _____ Nature of Item _____________ Cash Inflow ______ Cash Outflow

2018……………….. Purchase price……………………………………. $86,000

2018……………….. Revenue………………….. $30,000

2019……………….. Revenue…………………… 40,000

2020……………….. Revenue…………………… 28,000

2020………………. Major overhaul…………………………………….. 12,000

2021……………….. Revenue…………………… 20,000

2022……………….. Revenue…………………… 14,400

2022……………….. ……………….. 9,600

Required

a. Determine the using the accumulated cash flows approach.

b. Determine the using the average cash flows approach. Round your computation to one decimal point.

 

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