AMP, Inc., has invested $2,165,800 on equipment. The firm uses payback period cr

Question

AMP, Inc., has invested $2,165,800 on equipment. The firm uses payback period criteria of not accepting any project that takes more than four years to recover costs. The company anticipates cash flows of $ 448,386, $512,178, $563,255, $764,997,$816,500 and $825,375 over the next six years. What is the payback period? AMP, Inc., has invested $2,165,800 on equipment. The firm uses payback period criteria of not accepting any project that takes more than four years to recover costs. The company anticipates cash flows of $ 448,386, $512,178, $563,255, $764,997,$816,500 and $825,375 over the next six years. What is the payback period?

Explanation / Answer

the company's payback period is :

upto 4th year the total cash inflow is $$2,288,816.

so the Pay back period is in between 3 rd and 4th year.

= 3 years+ (641,981/764,997)*12

3 years 10 montsh is the pay back period.

years cash inflows ($) cululative cash inflows 1 448,386 448,386 2 512,178 960,564 3 563,255 1,523,819 4 764,997 2,288,816 5 816,500

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