Solution:
Solving question first as per Chegg's guidelines:
1.Calculation of project payback period:
Year | Cash flow($) | Cummulative cash flows |
0 | -82000 | -82,000 |
1 | 40,000 | -42,000 |
2 | -21000 | -63,000 |
3 | 20000 | -43,000 |
4 | 30,000 | -13,000 |
5 | -10,000 | -23,000 |
6 | 23,500 | 5000 |
Payback Period=A+B/C
A=Last year with negative cummulative cash flows
B=Cummulative cash flow without negative sign,at the end of year A
C=cash inflow during the period following period A
Payback Period=5+(23,000/23500)
=5.98 years
Since the project payback period is 5.98 years and required payback period is 7 years,hence project payback period is lower than the required payback period.Consequently,I will accept the project.
Year Cash Flow 0 -$82,000.00 (Initial investment) S40,000.00 2 -$21,000.00 3 $20,000.00 4 $30,000.00 S $10,000.00...
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