Question

In: Economics

The following table shows the costs and benefits of 4 alternatives. What is the shortest pay...

The following table shows the costs and benefits of 4 alternatives. What is the shortest pay back period among all four alternatives if MARR =7%?

Year	A	B	C	D
0	-$9,000	-$12,000	-$10,000	-$12,000
1	2,000	3,500	0	0
2	2,000	0	1,000	-2,000
3	2,000	3,000	2,000	0
4	2,000	3,500	3,000	18,000
5	1,000	0	4,000	0
6	3,000	3,000	5,000	0

Expert Solution

Here in the question it is asked to calculate the payback period. In simple payback period does not consider MARR.

Calculating the cumulative cash flow of the four alternatives.

The payback period of alternative A = 5 years.

Now, calculating payback period of alternative B.

In case of alternative B the payback period is will be

Calculation of pay period of alternative C.

The pay back period is 5 years.

Now calculating the payback period of alternative D.

Calculating the payback period

The shortest payback period is of alternative D.

Note: Here it is asked to calculated the simple payback period.

Rahul Sunny answered 8 months ago

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