Question

Data Table Annual Net Cash Inflows Sandbox toy Toy action Year figure project project $ 371,500 $ 1.. 540,000 2.... 371,500 360,000 3. .. . 371,500 320,000 4.. .. 371,500 250,000 371,500 40,000 5.... $ 1,857,500 $ 1,510,000 Total Playland will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%

Answer 1

Solution: Year Full years + Amt to complete recovery in next year / Projected net cash inflow in next year = Payback 2 + 300000 / 320000)= 2.94 Years cash flow cumulative cash flow 01 - 1200000 -1200000 1 540000 -660000 2360000 -300000 3320000 20000 4 250000 270000 5 40000 310000 Residual value do not impact payback as it is received beyond payback period. This investment does pass payback rule as it is within prescribed limit of 3.5 Years. Sheet489 Sheet490 Sheet491Sheet492 Sheet493 Sheet494 Sheet495 Sheet496 Sheet497 en TO ENG UK 10:05 28/10/2019