Question

Bambi Corporation is considering an investment that will cost $80,000 and have a useful life of 4 years. The cash flows from the project are expected to be $25,000 per year in the first two years then $20,000 per year for the last two years. What is the payback period for this investment (Rounded to one decimal place)? Select one: O A 3.2 years O B. 3.5 years O C.3.1 years D. 3.9 years

Answer 1

(12) (x3) Answer Total Investment - $80,000 useful lese of 4 you year Cash Total flow Cash flow in Project by end of yeag year! $25,000 $25,000 (81) year 2 $25,000 $ 25,000 +$ 25,000 = $50 con (13) YI (+2) year 3 $ 25,000 $20,000 $25,000 $20,000 - $70,000 Year 4 $20,000 $25000+ $43,000 + $20,000 + $28,000 = 90,000 Payback period = Time period in which Investment is earned back ($80,000) in this case By the end of 3 years, total cash flow of project is $70,000. Next ye cash flow (heh yon is $20,000. Remaining amount = $85,000-70004 Payback period = 3 + Remanning Amt. Nexty, Cash flone - 3+ 10,000$ 20,000 OPTION-B is = 3.5 yes) Answer Correct Thank you, Request for a positive reviene