SOLUTION:-
Year | Cash flows | Cumulative Cash flows |
0 | (11000) | (11000) |
1 | 3350 | (7650) |
2 | 4180 | (3470) |
3 | 1520 | (1950) |
4 | 0 | (1950) |
5 | 1000 | (950) |
Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).
=0.
Hence since project never pays back;project must be rejected.
Compute the payback statistic for Project B if the appropriate cost of capital is 12 percent...
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