BAP Corporation uses a 12% target rate of return for new investment proposals. T
ID: 2726407 • Letter: B
Question
BAP Corporation uses a 12% target rate of return for new investment proposals. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. BAP Corporation uses a 12% target rate of return for new investment proposals. what is the cash payback period for this proposal?Explanation / Answer
Adding the First Two Cash Flows 45000+40800=85800
Subtracting from initial invetment=104330-85800=18530
This amount will be recovered in 18530/35200=.5264
Therefore, Payback Period = 2.5264
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