Question

The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows: Year Investment Cash Inflow 1 $15,000 $1,000 $ 8,000 $2,000 $2,500 $4,000 $5,000 $6,000 $5,000 $4,000

Answer 1

Total Investment = $15,000+ $8,000 = $23,000 Year Cumulative Inflow $1000 - of msbordo Cash Inflow $1000 $2,000 $2,500 $ 4,000 $ 5.000 $ 6,000 & 5,000 $ 4,000 $3,000 $2,000 $3,000 $5,500 $9,500 $14,500 $20,500 $25,500 $89,500 $32,500 10 $34,500 اعلقہارا Payback period - (A-1) + Cost - Cumulative cash flow (A-1). Cash flow A A = year in which cumulative cash flows from Investment exceed the initial Cost. A-1 = year prior to A Cash flowA - Net cash flow in year A Cumulative lash flow A- - Cumulative cash flows from Investment at the end of year (A-1) Cost e l - Initial Investment

Payback period - 6t $23,000 - $20,500 $5,000 = = 6 + 6.5 0.5 years No affected if the seural times does not take Payback period would not be cash inflow in the last year well as large, because Payback period into account cash flouls occuring after payback period.

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