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
Ans investment X 3.25 years
investment Y 2.33 years
| Year | Cash Flow- Investment X | Cumulative Cash Flow | Year | Cash Flow- Investment Y | Cumulative Cash Flow | |
| 0 | -55000 | -55000 | 0 | -55000 | -55000 | |
| 1 | 15000 | -40000 | 1 | 25000 | -30000 | |
| 2 | 25000 | -15000 | 2 | 25000 | -5000 | |
| 3 | 10000 | -5000 | 3 | 15000 | 10000 | |
| 4 | 20000 | 15000 | 4 | 0 | 10000 | |
| 5 | 20000 | 35000 | 5 | 0 | 10000 | |
| TOTAL | 35000 | TOTAL | 10000 | |||
| Payback Period = | INVESTMENT X | Payback Period = | INVESTMENT Y | |||
| 3 YEARS + 5000/20000 | 2 YEARS + 5000 / 15000 | |||||
| 3.25 YEARS | 2.33 YEARS | |||||
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