January 2015
Beginner
480 pages
31h 42m
English
These problems are available in MyFinanceLab
Payback period. Given the cash flow of four projects—A, B, C, and D—and using the payback period decision model, which projects do you accept and which projects do you reject if you have a three-year cutoff period for recapturing the initial cash outflow? For payback period calculations, assume that the cash flow is equally distributed over the year.
| Cash Flow | A | B | C | D |
|---|---|---|---|---|
| Cost | $10,000 | $25,000 | $45,000 | $100,000 |
| Cash flow year 1 | $ 4,000 | $ 2,000 | $10,000 | $ 40,000 |
| Cash flow year 2 | $ 4,000 | $ 8,000 | $15,000 | $ 30,000 |
| Cash flow year 3 | $ 4,000 | $14,000 | $20,000 | $ 20,000 |
| Cash flow year 4 | $ 4,000 | $20,000 | $20,000 | $ 10,000 |
| Cash flow year 5 | $ 4,000 | $26,000 | $15,000 | $ 0 |
| Cash flow year 6 |
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