The American Pharmaceutical Company APC has a policy thait a

The American Pharmaceutical Company (APC) has a policy thait all capital investments must have a three year or less discounted payback period in order to be corsid red trtning The MARR at ARC ito% meet this benchmark lor funding? per year, isthe pred desated here able to End of Year Cash 25.000 $00,000 $85,000 Click the icon to-ths itee-and arnuitytatie for discrete compordeg when the MARR is 10% per 380,000 85,000 The payback period is years (Round to the nearest whole mumber The project the benchmark does riot meet Enter your answer in the answer box

Solution

Year Cash flows PVF @ 10% Present value Cumulative Cash flows 0 -285000 1 -285000 -285000 1 -25000 0.909091 -22727.3 -307727 2 60000 0.826446 49586.78 -258140 3 165000 0.751315 123966.9 -134174 4 240000 0.683013 163923.2 29749.68 5 360000 0.620921 223531.7 253281.4 6 85000 0.564474 47980.28 301261.6 7 85000 0.513158 43618.44 344880.1 8 85000 0.466507 39653.13 384533.2 9 85000 0.424098 36048.3 420581.5 Payback = 3 years + (134174/163923) = 3.82 years The Payback periiod is 3.82 years The project does not meet the becnchmark