Beyer Company is considering the purchase of an asset for $240,000. It is expect

Question

Beyer Company is considering the purchase of an asset for $240,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year.

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 place.)

Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 60,000 $ 36,000 $ 60,000 $ 150,000 $ 25,000 $ 331,000 Cumulative Net Cash Inflow Outflow) Year Cash inflow uttloww 0 (240,000) 4 Payback period

Explanation / Answer

Year Cash Inflow ( Outflow) Cumulative Net Cash Inflow ( Outflow) 0 $ ( 240,000) $ ( 240,000) 1 60,000 (180,000) 2 36,000 (144,000) 3 60,000 (84,000) 4 150,000 66,000 5 25,000 91,000 91,000 Payback Period = 3.56 years

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