Homework Answers
Cumulative net cash flows are:
Year 0=-5000000
Year 1:275000-5000000=-4725000
Year 2:275000-4725000=-4450000
Year 3:275000-4450000=-4175000
Year 4:275000-4175000=-3900000
Year 5:275000-3900000=-3625000
Year 6:275000-3625000=-3350000
Year 7:275000-3350000=-3075000
Year 8:275000-3075000=-2800000
Year 9:275000-2800000=-2525000
Year 10:275000-2525000=-2250000
Year 11:275000-2250000=-1975000
Year 12:275000-1975000=-1700000
Year 13:275000-1700000=-1425000
Year 14:275000-1425000=-1150000
Year 15:275000-1150000=-875000
Year 16:275000-875000=-600000
Year 17:275000-600000=-325000
Year 18:275000-325000=-50000
Year 19:275000-50000=225000
Payback period=Full years until recovery +(Unrecovered cost at the
beginning of last year)/(Cash flow during the last year)
Payback period=18 +(50000)/(275000)=18.181818 or 18.18 Years (Rounded to two decimal places)
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