Payback Period
Beyer Company is considering the purchase of an asset for $180,000.
a. Assume it is expected to produce net cash flows of $66,000 a year for 5 years. Compute the payback period. years (enter as x.xx)
b. Now assume the cash flows do not occur evenly, but have the following cash flow stream.
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Total | |
Net cash flows | $60,000 | $40,000 | $70,000 | $125,000 | $35,000 | $330,000 |
Compute the payback period. years (Enter as x.xx)
A. Payback period = Initial investment / Annual net cash flows.
>> Payback period = $ 180,000 / $ 66,000.
>> Payback period = 2.73 years
B Payback period
Payback Period Beyer Company is considering the purchase of an asset for $180,000. a. Assume it...
Beyer Company is considering the purchase of an asset for $180,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Net cash flows Year 1 $60,000 Year 2 $40,000 Year 3 $70,000 Year 4 $125,000 Year 5 $35,000 Total $330,000 Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback period answer to 2 decimal place.) Year Cash Inflow (Outflow)...
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