Question

Assume a $100,000 investment and the following cash flows for two alternatives. Year Investment A Investment B 1 $ 30,000 $ 45,000 2 35,000 30,000 3 25,000 50,000 4 20,000 — 5 15,000 — a. Calculate the payback for investment A and B. (Round your answers to 2 decimal places.)

Answer #1

Inv A | ||

Year | Cash flow stream | Cumulative cash flow |

0 | -100000 | -100000 |

1 | 30000 | -70000 |

2 | 35000 | -35000 |

3 | 25000 | -10000 |

4 | 20000 | 10000 |

5 | 15000 | 25000 |

Payback period is the time by which undiscounted cashflow cover the intial investment outlay | |||||

this is happening between year 3 and 4 | |||||

therefore by interpolation payback period = 3 + (0-(-10000))/(10000-(-10000)) | |||||

3.5 Years |

Inv B | ||

Year | Cash flow stream | Cumulative cash flow |

0 | -100000 | -100000 |

1 | 45000 | -55000 |

2 | 30000 | -25000 |

3 | 50000 | 25000 |

Payback period is the time by which undiscounted cashflow cover the intial investment outlay | |||||

this is happening between year 2 and 3 | |||||

therefore by interpolation payback period = 2 + (0-(-25000))/(25000-(-25000)) | |||||

2.5 Years |

Assume a $45,000 investment and the following cash flows for two
alternatives:
Year
Investment A
Investment B
1
$10,000
$10,000
2
15,000
15,000
3
15,000
30,000
4
15,000
—
5
3,900,000
—
Calculate the payback for investment A and B. (Round the
final answers to 2 decimal places.)
Payback period
Investment A
years
Investment B
years
Which of the alternatives would you select under the payback
method?
Investment A
Investment B

Assume a $105,000 investment and the following cash flows for
two alternatives.
Year
Investment A
Investment B
1
$
45,000
$
55,000
2
30,000
30,000
3
15,000
25,000
4
30,000
—
5
10,000
—
a. Calculate the payback for investment A and B.
(Round your answers to 2 decimal places.)
b. Which investment would you select under the
payback method?
Investment A
Investment B
c. If the inflow in the fifth year for Investment
A was $10,000,000 instead...

Assume a $85,000 investment and the following cash flows for two
alternatives.
Year
Investment A
Investment B
1
$
25,000
$
35,000
2
25,000
35,000
3
25,000
20,000
4
20,000
—
5
20,000
—
a. Calculate the payback for investment A and B.
(Round your answers to 2 decimal places.)
b. Which investment would you select under the
payback method?
Investment A
Investment B
c. If the inflow in the fifth year for Investment
A was $20,000,000 instead...

Assume a $72,000 investment and the following cash
flows for two alternatives.
year.
investment a.
investment b
1.
$25,000.
$22,000
2.
25,000.
15,000
3.
15,000.
50,000
4.
10,000.
--------
5.
30,000.
---------
calculate the payback for investment A and B

Assume a $55,000 investment and the following cash flows for two
alternatives.
Year
Investment X
Investment Y
1
$15,000
$25,000
2
25,000
25,000
3
10,000
15,000
4
20,000
—
5
20,000
—
a. Calculate the payback for investment X and Y.
(Do not round intermediate calculations. Round your answers
to 2 decimal places.)
investment X ________ years
investment Y ________ years

Assume a $90,000 investment and the following cash flows for two
alternatives.
Year
Investment A
Investment B
1
$
30,000
$
30,000
2
25,000
30,000
3
20,000
40,000
4
30,000
—
5
25,000
—
a. Calculate the payback for investment A and B.
(Round your answers to 2 decimal places.)
Investment A_________years
investment B___________years
b. Which investment would you select under the
payback method?
Investment A
Investment B
c. If the inflow in the fifth year for Investment
A...

Assume a $70,000 investment and the following cash flows for two
alternatives.
Year
Investment A
Investment B
1
$
20,000
$
35,000
2
25,000
25,000
3
20,000
20,000
4
20,000
—
5
25,000
—
a. Calculate the payback for investment A and
B.

assume a $42,000 investment and the following cash
flows for two alternatives.
year. investment
x. investment y
1.
$15,000.
$22,000
2.
14,000.
15,000
3.
10,000.
10,000
4.
15,000.
----
5.
20,000.
------
calculate the payback for investment x and y.

Assume a $90,000 investment and the following cash flows for two
alternatives: Year Investment A Investment B 1 $25,000 $40,000 2
30,000 40,000 3 25,000 28,000 4 19,000 __Calculate the payback for
Investments A and B. If the inflow in the fifth year for Investment
A was $25,000,000 instead of $25,000, would your answer change
under the payback method?

King Co. invests $105,000 and the following cash flows for two
investments:
Year
Investment A
Investment B
1
$30,000
$40,000
2
25,000
30,000
3
20,000
35,000
4
30,000
—
5
4,300,000
—
Calculate the payback period for investment A and B (in yrs)

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