Chap 13 EXR Quest 1 The management of Unter Corporation, an architectural design

Question

Chap 13 EXR Quest 1

The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:

Required:

1. Determine the payback period of the investment.

2. Would the payback period be affected if the cash inflow in the last year were several times as large?

Required 1

Determine the payback period of the investment. (Round your answer to 1 decimal place.)

Required 2

Would the payback period be affected if the cash inflow in the last year were several times as large?

Year Investment Cash Inflow 1 $ 78,000 $ 5,000 2 $ 5,000 $ 10,000 3 $ 12,000 4 $ 15,000 5 $ 18,000 6 $ 16,000 7 $ 14,000 8 $ 12,000 9 $ 11,000 10 $ 11,000

Explanation / Answer

Year Cashflow Cumulative cashflow 0 0 0 1 -73000 -73000 2 5000 -68000 3 12000 -56000 4 15000 -41000 5 18000 -23000 6 16000 -7000 7 14000 7000 8 12000 19000 9 11000 30000 10 11000 41000 You may see that the cashflows are turning positive Year 7 So, payback period = 6+7000/14000 = 6.5 years Cashflows in the last years will not affect the payback period as the payback period is after 6 years and cashflows after the payback period do not matter

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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