Calculate the payback period for projects X and Y. They both cost $100,000 (show your work) Year 0...

Calculate the payback period for projects X and Y. They both cost $100,000 (show your work)

Year 0 1 2 3 4 5 6

Project X $20m 30m 40m 20m 10m 10m

Project Y $40m 30m 30m 20m 10m 0

Expert Solution

Payback period = The year in which the cumulative cash flow was last negative + (the positive value of the cumulative cash flow in that year) / (cash flow in the next year)

Project X payback period = 0 + 100,000/20,000,000

Project X payback period = 0.005 Years

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Project Y Payback Period = 0 + 100,000/40,000,000

Project Y Payback Period = 0.0025 Years

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jeff jeffy answered 2 years ago

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