Question

Landrum Corporation is considering investing in specialized equipment costing $250,000. The equipment has a usefallse of 5 veass and a residual value of $20000 Depreciation is calculated using the straight-line method. The expected net ash inflows from the arrestment are: Year 1 $ 60000 $90.000 $110000 Year 3 Year 5 Total cash inflow $ 25,000 $325000) Landram Corporation's requed rate of retum on investments is 14%. What is the Parback Penod of the Investment using average cash flows

Answer 1

Annuao eraman Statement showing Annual Cumalaive @ghhouse Cumadative Year canf lows ($) Cashflows 60,000 60,000 90.000 150,000 110,000 260,000 40,000 300,000 25,000 325,000 Pay back period in case of uneven nonucl Cashflows :- - pay completed years + Initial cashflow in completed T Investment bojose pay back period year Cashflow in Payback year. s 2 + 250,000 - 150,000 110,000 2.909 years . Payback period wing average cashflows is 2.909 years