Chapter 9Capital Bud O extomheducationcomhmpxe0452757215345

Chapter 9-Capital Bud × O exto.mheducation.com/hm.pxe.-0.4527572153451952 1531526019506 connect FINANC apter 9-Captital Budgeting& Net Present Value Question 1 (of 7 velue: 10.00 polnts What is the payback period for the folloving set of cash flows? (Round your answer to 2 decimal places e.g, 32.16.) Cash Year Flow 0 -$5,800 1,450 1,650 2.050 1,550 Payback period years References eBook & Resources Worksheet

Solution

Period

Expected Cash flow

Remaining Cash flow

0

-5800

-5800

1

1450

-4350

2

1650

-2700

3

2050

-650

4

1550

+900

Payback period = A + B / C

A = last period with negative cash flow = 3

B = amount of cash remaining after A = 650

C = total amount of cash generated in the period immediately following A = 1550

Payback period = A + B / C

= 3 + 650/1550 =3.42 years

Payback period =3.42 years

Period	Expected Cash flow	Remaining Cash flow
0	-5800	-5800
1	1450	-4350
2	1650	-2700
3	2050	-650
4	1550	+900