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92: An investment of $200,000 is expected to generate the following WW,000 is expected to generate the following cash inflows
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Answer #1
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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Answer #2
Determine the disscounted payback period of the investment using disscount rate 12%
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