US Robotics is evaluating a new product line. The CFO asks for an estimate of number...
US Robotics is evaluating a new product line. The CFO asks for
an estimate of number of years to recover the initial investment,
ignoring the time value of money. You realize that this is the
payback period. The estimated cash flows from the new product line
appear below. (Answer in years, round to 2 places)
Year 0 cash flow = -90,000
Year 1 cash flow = -41,000
Year 2 cash flow = 29,000
Year 3 cash flow = 29,000
Year 4 cash flow = 29,000
Year 5 cash flow = 26,000
Year 6 cash flow = 42,000
Year 7 cash flow = 44,000
Homework Answers
Ans 5.43 years
| Year | Cash Flow | Cumulative Cash Flow |
| 0 | -90000 | -90000 |
| 1 | -41000 | -131000 |
| 2 | 29000 | -102000 |
| 3 | 29000 | -73000 |
| 4 | 29000 | -44000 |
| 5 | 26000 | -18000 |
| 6 | 42000 | 24000 |
| 7 | 44000 | 68000 |
| TOTAL | 68000 | |
| Payback Period = | 5 YEARS + 18000/42000 | |
| 5.43 YEARS |
Add Answer to:
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