Question

please answer 9 and 10 showing all work. thank you!

Payback With Unequal Cash Flows exa: Landrum Corporation is considering investing in pecialized equipment conting 230.000. The equipment a un tal life of 5 years and a rendus value of $20,000 Depreciation is calculated using the straight-live method. The expected net cash inflows from the investment are: Year! Year 2 Year 50.000 $ 90,000 $110.000 $ 40.000 $ 25,000 $325,000 Year 5 Total sashinews Landnam Corporation's required rate of retum on investments is 10% Wat is the Payback Ponod of the lowestment using accumulated cash flows Another Approach to Unequal Cash Flows ex .10 . Another approach is to calculate the average annual cash inflows to compute the payback period Last Corporation is condening engin specialized cong 250.000. The equipement les au t e of year and value of 20000 Depreciation is called de stunghine method. The expected neath now from the rest Totalcast Landrum Corporations required rate of retum on the streets to 14%. What is the perback nod of we nt verage cash flow Unadjusted Rate of Return Skip For Accounting Majors - review a method called Accounting Rate of Return

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Answer 1

9)
Year	Cash inflow/(Outflow)	Cumulative Cash flow
0	$                 (250,000)	$     (250,000)
1	$                     60,000	$     (190,000)
2	$                     90,000	$     (100,000)
3	$                   110,000	$          10,000
4	$                     40,000
5	$                     25,000
Under thi method the cash flows are accumulated till the time it gets positive, In the above case
the initial investmet of $259,000 has been received in Year 3, therefore the payback period is 3 years
10)
Year	Cash inflow/(Outflow)
1	$                     60,000
2	$                     90,000
3	$                   110,000
4	$                     40,000
5	$                     25,000
Total Cash Inflow	$                   325,000
Average annual Cash inflow	$                     65,000
Initial Investment - A	$                   250,000
Average Cash inflow -B	$                     50,000
Payback period (A/B)	5.00