Homework Answers
| Year | Cash Flow |
Cumulative Cashflow (currecnt cash flow + all previous cashflows) |
| 1 | 70000 | 70000 |
| 2 | 60000 | 130000 |
| 3 | 55000 | 185000 |
| 4 | 40000 | 225000 |
| 5 | 30000 | 255000 |
| 6 | 25000 | 280000 |
|
As Initial Outlay is 200000, it will be recoverd in between year 3 & 4. Therefore, Payback Period will be between 3rd and 4th year. |
||
|
Payback Period will be 3 years + proportionate of
4th year Payback Pariod = 3+[(200000-185000)/(225000-185000)] |
||
| Payback Period = 3.375 years |
NO, the Investment should NOT be made.
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For the table, it's the annual machine maintenaince expense
For Years
1 _ 2000
2_3000
3_3000
4_4000
5_4000
Thanks
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