Question

In: Accounting

Christopher Electronics bought new machinery for $5,030,000 million. This is expected to result in additional cash...

Christopher Electronics bought new machinery for $5,030,000 million. This is expected to result in additional cash flows of $1,225,000 million over the next 7 years. What is the payback period for this project? Their acceptance period is five years.

Solutions

Expert Solution

Yes project should be accepted
PBP
Time Amount Cumulative
                                                                                      -   (5,030,000.00) (5,030,000.00)
                                                                                 1.00      1,225,000.00 (3,805,000.00)
                                                                                 2.00      1,225,000.00 (2,580,000.00)
                                                                                 3.00      1,225,000.00 (1,355,000.00)
                                                                                 4.00      1,225,000.00      (130,000.00)
                                                                                 5.00      1,225,000.00     1,095,000.00
                                                                                 6.00      1,225,000.00     2,320,000.00
                                                                                 7.00      1,225,000.00     3,545,000.00
PBP= 4 + 130,000 / 1225,000
PBP= 4 + .11 Years
PBP = 4.11 Years Approx

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