Question

Assume that cash flows arise at the end of each year and ignore cash flows arising...

Assume that cash flows arise at the end of each year and ignore cash flows arising this period.

calculate payback period and net present value

Cash outflow : $150

Cash inflow year1 : $50

Cash inflow year2 : $55

Cash inflow year3 : $60

Cash proceeds on sale of business year3 : 100

Discount rate : 13%

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Homework Answers

Answer #1

Present value factor can be found out in your text book or at Google. There in look at 13%. You will find present values corresponding to their year.

For calculating payback period when cash inflows are not evenly distributed, cumulative cash inflow is calculated.

Formula for calculating payback period in case of uneven cash flow is:

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