In: Accounting
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
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 |