Question

Culver Company is considering a long-term investment project called ZIP. ZIP will require an investment of $133,200. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $82,300, and annual cash outflows would increase by $45,300. Compute the cash payback period.

What is **Cash payback period**?

Answer #1

Solution:-

**To Calculate Cash Payback Period-**

Cash Payback Period |
|||

Year |
Cash Inflow |
Cash Outflow |
Net Cash Flow |

0 | 0 | 1,33,200 | -1,33,200 |

1 | 82,300 | 45,300 | 37,000 |

2 | 82,300 | 45,300 | 37,000 |

3 | 82,300 | 45,300 | 37,000 |

4 | 82,300 | 45,300 | 37,000 |

Cash Payback Period =

Cash Payback Period =

**Cash Payback Period = 3.60 Years**

**Payback period is the amount of time which it takes to
recover the initial cost of investment. Payback period is lower the
better. Cash Payback period does not consider the Non Cash expense
and Income Like Depreciation etc.**

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