The following details are provided by a manufacturing? company: Product line Inv
ID: 2533594 • Letter: T
Question
The following details are provided by a manufacturing? company:
Product line
Investment
$ 1 comma 130 comma 000$1,130,000
Useful life
1414 years
Estimated annual net cash inflows for first year
$ 440 comma 000$440,000
Estimated annual net cash inflows for second year
$ 380 comma 000$380,000
Estimated annual net cash inflows for next ten years
$ 380 comma 000$380,000
Residual value
$ 70 comma 000$70,000
Depreciation method
Straightminus?line
Required rate of return
15?%
Calculate the payback period for the investment.? (Round your answer to two decimal? places.)
A.
2.57
years
B.
2.87
years
C.
2.65
years
D.
2.82
years
Product line
Investment
$ 1 comma 130 comma 000$1,130,000
Useful life
1414 years
Estimated annual net cash inflows for first year
$ 440 comma 000$440,000
Estimated annual net cash inflows for second year
$ 380 comma 000$380,000
Estimated annual net cash inflows for next ten years
$ 380 comma 000$380,000
Residual value
$ 70 comma 000$70,000
Depreciation method
Straightminus?line
Required rate of return
15?%
Explanation / Answer
Calculate payback period :
Payback period = 2 years+310000/380000 = 2.82 years
so answer is d) 2.82 years
Cash flow Cumulative cash flow 1 440000 440000 2 380000 820000 3 380000 1200000Related Questions
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