Question

Multiple Choice Question 42 Monty Inc. is contemplating a capital investment of $88000. The cash flows over the project's four years are: Expected Annual Expected Annual Year Cash Outflows Cash Inflows 1 $40000 $13000 45000 2 17000 40000 22000 4 50000 20000 The cash payback period is 3.08 years 3.99 years 3.50 years 2.17 years. Open Show Work Click if you would like to Show Work for this question: LINK TO TEXT 2000-2019 John Wiley & Sons, Inc. All Rights Reserved. A Division of John Wiley & Sons, Inc. cy

Answer 1

Solution:

Computation of Cumulative Net cash Flows
Year	Cash Inflows	Cash outflows	Net Cash flows	Cumulative Net cash flow
1	$40,000.00	$13,000.00	$27,000.00	$27,000.00
2	$45,000.00	$17,000.00	$28,000.00	$55,000.00
3	$40,000.00	$22,000.00	$18,000.00	$73,000.00
4	$50,000.00	$20,000.00	$30,000.00	$103,000.00

Payback period = 3 years + ($88,000 - $73,000) / $30,000 = 3.50 years

Hence 3rd option is correct.