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Blossom Corp. is considering the purchase of a piece of equipment that costs $30000. Projected net...

Blossom Corp. is considering the purchase of a piece of equipment that costs $30000. Projected net annual cash flows over the project’s life are:

Year Net Annual Cash Flow
1 $8000
2 15000
3 25000
4 9000


The cash payback period is

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Expert Solution

Calculation of Pay Back Period
Year Cash Flow Cumulative Net  
($) Cash Flow ($)
0                                   (30,000.00)                           (30,000.00)
1                                      8,000.00                           (22,000.00)
2                                    15,000.00                            (7,000.00)
3                                    25,000.00                            18,000.00
4                                      9,000.00                            27,000.00
Payback period = 2nd year + (7,000 / 25,000)
= 2.28 years

ekkarill92 answered 2 years ago
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