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Compute the payback statistic for Project B if the appropriate cost of capital is 12 percent...

Compute the payback statistic for Project B if the appropriate cost of capital is 12 percent and the maximum allowable payback period is three years. (If the project never pays back, then enter a "0" (zero).)

Project B
Time: 0 1 2 3 4 5
Cash flow: –$11,600 $3,410 $4,300 $1,640 $0 $1,120

Solutions

Expert Solution

payback period is the period in which initial investment is recovered.

Year Opening Bal CF Closing Bal
1 $ 11,600.00 $ 3,410.00 $              8,190.00
2 $   8,190.00 $ 4,300.00 $              3,890.00
3 $   3,890.00 $ 1,640.00 $              2,250.00
4 $   2,250.00 $             -   $              2,250.00
5 $   2,250.00 $ 1,120.00 $              1,130.00

Even after 5 years completion, Project is unable to recover initial investment.

Hence Project is Rejected.

jeff jeffy answered 9 months ago
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