Homework Answers
1.
Correct Answer:
B
Simple payback method is simple and easy to calculate, though it does not use time value of money.
--------------
2.
Let investment amount = P
Then,
10000 = P*(F/P, 12%, 5) = P*1.7623
P = 10000/1.7623
P = $5674.4 or $5674
So, amount of investment is $5674.4 or $5674.
----------------
3.
Monthly net cash inflows = 20000*(.89-.43)
Monthly net cash inflows = $9200
So,
Payback period = 158000/9200
Payback period = 17.17 months or 17 months
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