Dealing with capital budgeting

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Reference no: EM13916452

Why when dealing with capital budgeting do we only deal with actual dollars in and out and NOT the normal accrual based income statements we've done (do) in regular accounting?

Lodi Products is considering acquiring a manufacturing plant. The purchase price is $2,320,000. The owners believe the plant will generate net cash inflows of $290,000 annually. It will have to be replaced in seven years. To be profitable, the investment pay-back must occur before the investment's replacement date. Use the payback method to determine whether Lodi Products should purchase this plant. Show your work

Reference no: EM13916452

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