AMP Inc has invested 2165800 on equipment The Firm uses payb

AMP, Inc., has invested $2,165,800 on equipment. The Firm uses payback period criteria of not accepting any project that takes more than four years to recover costs. The company anticipates cash flows of $436,386, $512,178, $563,255, $764,997, &816,500, and $825,375 over the next six years. What is the payback period?

Solution

AMP, Inc., has invested $2,165,800 on equipment. The Firm uses payback period criteria of not accepting any project that takes more than four years to recover costs. The company anticipates cash flows of $436,386, $512,178, $563,255, $764,997, &816,500, and $825,375 over the next six years. What is the payback period?

436,386 + 512,178 + 563,255 = 1,511,819 is less than 2,165,800

436,386 + 512,178 + 563,255 + 764,997 = 2,276,816 is greater than 2,165,800

The cost will get paid back after the third year but before the fourth year is over.

2,165,800