Question

In: Accounting

Determine the cash payback period.

A project has estimated annual net cash flows of $30,000. It is estimated to cost $105,000. Determine the cash payback period.

Solutions

Expert Solution

We must ascertain how long it takes for the project's net cash flows to recoup the original investment in order to calculate the cash payback time. The project's expected yearly net cash flows in this scenario are $30,000, while its overall cost is $105,000.

One way to determine the cash payback period is to divide the original investment by the annual net cash flows:

Cash Payback Period = Initial Investment / Annual Net Cash Flows

Cash Payback Period = $105,000 / $30,000

Cash Payback Period = 3.5 years

 

As a result, the project's cash payback period is 3.5 years, which means that it will take that long for the project's net cash flows to pay back the $105,000 initial investment.

balaji rao answered 1 year ago
Next > < Previous

Related Solutions

Determine the cash payback period. Round to one decimal place.
A project has estimated annual net cash flows of $95,200. It is estimated to cost $580,720. Determine the cash payback period. Round to one decimal place.
Determine the payback period using the accumulated and average cash flows approaches.
Baird Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Baird would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow:   Year Nature of Item Cash Inflow   Cash Outflow Year 1 Purchase price...
(Payback period​) What is the payback period for the set of cash flows in the popup​...
(Payback period​) What is the payback period for the set of cash flows in the popup​ window, LOADING... ​? The payback period for the set of cash flows is nothing years. 0 -11,200 1 3,800 2 4,800 3 3,700 4 4,600 5 3,200 ​ (Payback ​period, NPV,​ PI, and IRR calculations​) You are considering a project with an initial cash outlay of ​$75,000 and expected free cash flows of ​$22,000 at the end of each year for 6 years. The...
Determine the Payback Period, the Discounted Payback Period, and the Net Present Value for the following...
Determine the Payback Period, the Discounted Payback Period, and the Net Present Value for the following after-tax cash flow projections. Also tell me whether the IRR is greater or less then the RRR. A. Year ATCF 0 $(60,000) 1 21,000 2 27,000 3 24,000 4 16,000 Assume a 16% required rate of return
Determine the Payback Period, the Discounted Payback Period, and the Net Present Value for the following...
Determine the Payback Period, the Discounted Payback Period, and the Net Present Value for the following after-tax cash flow projections. Also tell me whether the IRR is greater or less then the RRR B. Year ATCF 0 (100,000) 1 (320,000) 2 130,000 3 185,000 4 200,000 5 195,000 6 150,000 Assume a 20% required rate of return
Match up the payback period with the cash flows.       -       A.   ...
Match up the payback period with the cash flows.       -       A.       B.       C.       D.       E.    CF0: -905 CF1: 830 CF2: 130 CF3: 770 CF4: 270       -       A.       B.       C.       D.       E.    CF0: -1075 CF1: 850 CF2: 320 CF3: 730 CF4: 100       -       A.       B.       C.   ...
The Basics of Capital Budgeting: Payback Period Payback Period Payback period was the earliest ________ selection...
The Basics of Capital Budgeting: Payback Period Payback Period Payback period was the earliest ________ selection criterion. -Select- capital structure financial statement capital budgeting The _________ -Select- NPV MIRR IRR payback is a "break-even" calculation in the sense that if a project's cash flows come in at the expected rate, the project will break even. The equation is: The -Select- shorter longer a project's payback, the better the project is. However, payback has 3 main disadvantages: (1) All dollars received...
A. What is the payback period for the following set of cash flows?    Year Cash...
A. What is the payback period for the following set of cash flows?    Year Cash Flow 0 −$ 5,300        1 2,300        2 2,300        3 1,400        4 1,100        B. A project with an initial cost of $22,350 is expected to generate cash flows of $5,200, $7,300, $8,400, $7,300, and $6,000 over each of the next five years, respectively. What is the project's payback period? C. A new project has an initial cost of $133,000. The...
Distinguish between the payback period and the discounted payback period?
Distinguish between the payback period and the discounted payback period?
Payback Period
A project has an initial cost of $500,000 whereas it has an expected annual cash flow of $75,000 each year for the next 10 years. The firm has the criteria of accepting the project if its payback period is 6 years or less. Based on the payback period, state whether the project would be accepted or not?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT