The following details are provided by a manufacturing company: Investment Useful

Question

The following details are provided by a manufacturing company: Investment Useful life Estimated annual net cash inflows for first year Estimated annual net cash inflows for second year Estimated annual net cash inflows for next ten years Residual value Depreciation method Required rate of return Calculate the payback period for the investment. (Round your answer to two decimal places.) $1,150,000 12 years $450,000 $400,000 $370,000 $70,000 Straight line 15% O A. 2.56 years B. 2.81 years O C. 2.83 years O D. 3.07 years

Explanation / Answer

Investment = $1,150,000
Net Cash Flow, Year 1 = $450,000
Net Cash Flow, Year 2 = $400,000
Net Cash Flow, Year 3 = $370,000

Company recovered $850,000 in first two years and remaining $300,000 in 3rd year

Payback Period = 2 + $300,000 / $370,000
Payback Period = 2.81 years

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.