s//edugen.wileyplus.co udent/mainfr.un Kimmel, Accounting, Ge Gradebook ORION Do

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s//edugen.wileyplus.co udent/mainfr.un Kimmel, Accounting, Ge Gradebook ORION Downloadable eTextbook Multiple Choice Question 41 Sheridan Corp, is considering the purchase of a piece of equipment that costs $20000. Projected net annual cash flows over the project's Ie are: 8000 10000 10000 7000 The cash payback period is O 2.55 years. 1.95 years. O 2.20 years. O 2.50 years. Open Show Work Click if you would like to Show Work for this question: All Rights Reserved. A Division of 2ahn Wley& SnaIn arch

Explanation / Answer

Payback period calculation is the simple calcualtion for checking the return of our Basis investment in year CACULATION OF SIMPLE PPAYBACK PERIOD Answer =1 Period Particulars Inflow (Outflow) Cumulative Value 0 Outflow $             -20,000.00 $             -20,000.00 1 Inflow $                 8,000.00 $             -12,000.00 2 Inflow $               10,000.00 $               -2,000.00 3 Inflow $               10,000.00 $                 8,000.00 4 Inflow $                 7,000.00 $               15,000.00 In the 3rd year we recover our all money , but full 3rd year is not required for this so we can caluclate the exact period of payback Period required In the 3rd years = $                 2,000.00 Payback Period = 2 Years + $                 2,000.00 "/ " By $       10,000.00 Payback Period = 2 Years +                              0.20 Years Payback Period = 2.20 Years Answer = Option 3 = 2.20 Years

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