Long description
|
Project Long |
|
Project Short |
|
|
Annual cash flow |
Cumulative Cash flow |
Annual cash flow |
Cumulative Cash flow |
Initial cash outlay |
($100,000) |
($100,000) |
($100,000) |
($100,000) |
Year 1 |
70,000 |
(30,000) |
50,000 |
(50,000) |
Year 2 |
30,000 |
0 |
50,000 |
0 |
The text, The payback period equals two years for both projects because it takes two years to recover the cost of the initial outlay from the cash inflows. However, Project Long looks a lot better because it continues to provide cash inflows after the payback year points to the Year 2 row. |
||||
Year 3 |
30,000 |
30,000 |
0 |
0 |
Year 4 |
25,000 |
55,000 |
0 |
0 |
Year 5 |
10,000 |
65,000 |
0 |
0 |
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