Question 1 Not complete Marked out of 1.00 Lila Limited is a new is the relevant

Question

Question 1 Not complete Marked out of 1.00 Lila Limited is a new is the relevant cost and operating information relating to the new machane Inutial Cost Installation Costs $240262 $22052 11 years Expected annual cash operating savings-years$56092 1-11 $12802 Assuming Lila Lamited uses the payback method to evaluate capital expenditures, what is the payback period for thes expenditure? Select one O a 4.68 years O b. 6.06 years O c 389 years O d. 5 55 years Question 2 Not complete Marked out of 1.00 Plato Ltd. is considering one of two different projects Cash flow data for these projects are as follows Project CR ($60187) 21594 31834 4864 9932 Project DR Year 16764 40283 11000 Assuming the company's objective is to minimaze the payback period, what ss the payback perniod of the project that shoold be accepted? O a. 2.19 years O b 3.77 years

Explanation / Answer

1. In the first instance, it is 4.68 years (240262+22052)/56092 = 4.68

Payback perirod is the number of years required to recover the investment which does not include annual maintainance costs.

2 .2.77 years

the company should consider the project 2 of investment of $ 92988, by considering the following caluclation.

Payback period = year before full recovery+ unrecovered amount by the end of of next following year / cash flow during the year

= 2 + (92988-57047)/46958

= 2+ 0.765

=2.77 years

3. 3.56 years arrived by

  Last period with a negative discounted cumulative cash flow +  value of discounted cumulative cash flow at the end of the period / Discounted cash flow during the period

=   3 + |-37322.65| / 87367.21

discounted cash flows means cash flows dicountd to the present values by the present value factor.

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