The management of Unter Corporation, an architectural design firm, is considerin

Question

The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:    Year Investment Cash Inflow 1 $71,000      $6,000       2 $4,000      $12,000       3 $21,000       4 $22,000       5 $25,000       6 $23,000       7 $21,000       8 $19,000       9 $18,000       10 $18,000         

Required: 1. Determine the payback period of the investment. (Round your answer to 1 decimal place.)      

2. Would the payback period be affected if the cash inflow in the last year were several times as large?

Explanation / Answer

Year Investment Cash Inflow Unrecovered Investment 1 71000 6000 65000 2 4000 12000 57000 3 21000 36000 4 22000 14000 5 25000 -11000 6 23000 7 21000 8 19000 9 18000 10 18000 1 Payback period = 4+(14000/25000)= 4.6 years 2 No, it would not be affected

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