ACCOUNTING ter 24 Assignment Question 1 (of 7 value: 1.00 points is considering

Question

ACCOUNTING ter 24 Assignment Question 1 (of 7 value: 1.00 points is considering the purchase of an asset for $220,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year ear 2 Year 5Total Net cash flows S63,000 $34.000 $63,000 $150.000 $27.000 $337,000 Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.) lative Net Cash inflowCash Inflow Year

Explanation / Answer

the following is the calculation of payback period:

initial investment 220,000

this amount is recovered between year 3 and 4.

payback period = year 3 + (cumulative cash flow at end of year 3 in absolute amount) / year 4 cash flow

=>year 3 + (60,000/ 150,000)

=>3.4 years.

payback period = 3.4 years.

year cash inflow (outflow) cumulative net cash inflow 0 (220,000) (220,000) 1 63,000 (220,000)+63,000 =>(157,000) 2 34,000 (157,000) + 34,000 =>(123,000) 3 63,000 (123,000)+63,000=>(60,000) 4 150,000 (60,000)+150,000=>90,000

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