In: Finance

# Calculate Payback period, Net Present Value and Benefit Cost Ratio Period 0 1 2 3 4...

Calculate Payback period, Net Present Value and Benefit Cost Ratio

 Period 0 1 2 3 4 5 Year 2,019 2020 2021 2022 2023 2024 Cash Flows -30,000 11,000 x .8929 = 9821.9 14,000 x .7972 = 11,160.8 10,000 x .7118= 7,118 7,000 x .6335 = 4434.5 12,000 x .5674 = 6808.8

## Solutions

##### Expert Solution

 Payback Period = A + B C

Where,
A is the last period number with a negative cumulative cash flow;
B is the absolute value (i.e. value without negative sign) of cumulative net cash flow at the end of the period A; and
C is the total cash inflow during the period following period A

Payback Period = 2 + (5,000/10,000)

= 2 + 0.5

= 2.5 Years

Benifit Cost Ratio = Discounted value of incremental benefits ÷ Discounted value of incremental costs

= 39,359 ÷ 30,000

= 1.31

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