Question

In: Accounting

Ignore income taxes in this problem.) The Zinger Corporation is considering an investment that has the...

Ignore income taxes in this problem.) The Zinger Corporation is considering an investment that has the following data:


Year 1Year 2Year 3Year 4Year 5 Investment$13,500$4,100Cash inflow$3,100$3,100$8,000$5,100$5,100


Cash inflows occur evenly throughout the year. The payback period for this investment is: (Round your answer

3 years
4 years
3.7 years
4.7 years


Solutions

Expert Solution

Answer
The correct option is C : 3.7 years
Explanation
Year Cash outflow Cash inflow Cum. cash inflow
1 $                 -13,500 $           3,100 $      -10,400
2 $                   -4,100 $           3,100 $      -11,400
3 $           8,000 $        -3,400
4 $           5,100 $         1,700
5 $           5,100 $         6,800
payback period 3 +$3400/$5100
payback period = 3.7

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