Homework: CH12 Score: 1.29 of 3 pts Question 2, E 12-19A (similar to) Save 2 of

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Homework: CH12 Score: 1.29 of 3 pts Question 2, E 12-19A (similar to) Save 2 of 8 (2 complete) HW Score: 14.29%, 4.29 of 30 pts Question Help Walken Hardware is adding a new product line that will require an investment of $1,480,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $330,000 the first year, $285,000 the second year, and $250,000 each year thereafter for eight years. The investment has no residual value. Compute the payback period. First enter the tomula, then calculate the payback perlod. (Round your answer to two declmal places.) Full years Amount to complete recovery in next year Projected cash infiow in next year Payback years

Explanation / Answer

Walken Hardware Cash Flows Year Net cash flows Cumulative Cash flows 0 (1,460,000) (1,460,000) 1 330,000 (1,130,000) 2 285,000 (845,000) 3 250,000 (595,000) 4 250,000 (345,000) 5 250,000 (95,000) 6 250,000 155,000 7 250,000 405,000 8 250,000 655,000 9 250,000 905,000 10 250,000 1,155,000 Full Years +( Amount to complete recovery in next year / Projected cash inflow in next year )= Pay Back 5 +( 95,000 / 250,000 )= 5.38 Years

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