Compute the payback statistic for Project B if the appropriate cost of capital is 12 percent and the maximum allowable payback period is three years. (Round your answer to 2 decimal places. If the project never pays back, then enter a "0" (zero).)
Project B Time: 0 1 2 3 4 5
Cash flow: –$11,300 $3,380 $4,240 $1,580 $0 $1,060
Payback years ___________
Should the project be accepted or rejected? ______________
Payback period = 0 years.................(since the project never paysback).
The project should be rejected.
initial investment to be recovered = $11,300.
the following is the calculation of payback period:
year | cash flow | cumulative cash flow |
1 | 3,380 | 3,380 |
2 | 4,240 | 7,620 |
3 | 1,580 | 9,200 |
4 | 0 | 9,200 |
5 | 1,060 | 10,260 |
maximum cumulative cash flow is $10,260..
since the initial investment of 11,300 is never recovered, the project never paysback.
Compute the payback statistic for Project B if the appropriate cost of capital is 12 percent...
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