carr × Prin × Secure | https://oregonstate.instructure.com/courses/1648905/quizz

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carr × Prin × Secure | https://oregonstate.instructure.com/courses/1648905/quizzes/2397550/take Question1 0.3 pts Oregen State Consider 3 mutually exclusive alternatives. The MARR is 10% $45 $45 $45 $1 $1 $95 1. The payback period for A is 2. The payback period for B is 3 The payback period for C is 4 Based on payback period analysis, which alternative should be selected? For questions 1 through 3, enter your answer as: 1.23 - use 2 decimal places For question 4, enter your answer as A, B, or C D Question 2 0.35 pts Charlie's Sack Company purchased a new sack folding machine for $69154. It has savings of $21477 the first year, $12444 the second and third years and $6626 during years four through 15. In year 15 it is scrapped. What is the payback period for the machine? Enter your answer as 1.23 Use 2 decimal places.

Explanation / Answer

Payback period in conventional terms is the period in which the initial cost is covered. Hence the PB for A is 3 year when cumulative cash flow is 35, PB for B is 4 year (cumulative cash flow is -300 + 95 + 95 + 95 = -15 for three years and 80 for 4 years) and for C, PB period is 4 years

Select A on the basis of payback period

For the second question, the required payback period is found to be 7 years

Year Cash flow Cumulative Cash flow 0 -69154 -69154 1 21477 -47677 2 12444 -35233 3 12444 -22789 4 6626 -16163 5 6626 -9537 6 6626 -2911 7 6626 3715 8 6626 10341 9 6626 16967 10 6626 23593 11 6626 30219 12 6626 36845 13 6626 43471 14 6626 50097 15 6626 56723

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