Question

w of $3,000 after the of $8,000 after the $1333 after the end years (Payback) Determine each project's payback period: a. A project with an initial outlay of $10,000 results in a single free cash flow of $3.000 end of each year for 5 years A project with an initial outlay of $10,000 results in a single free cash flow of $8,000 end of each year for 5 years A project with an initial outlay of $3,000 results in a single free cash flow of $1,333 after th of each year for 5 years ,255 after the py a. A project with an initial outlay of $3,000 results in a single free cash now on nfach weare for 10 years. of vehurn. c.

Answer 1

Part a:
The cash flows are:
Year 0:-10000
Year 1:3000
Year 2:3000
Year 3:3000
Year 4:3000
Year 5:3000

Cumulative net cash flows:

Year 0:-10000
Year 1:3000-10000=-7000
Year 2:3000-7000=-4000
Year 3:3000-4000=-1000
Year 4:3000-1000=2000
Year 5:3000
Payback period=3+1000/3000=3.333 years

Part b:
Year 0:-10000
Year 1:8000
Year 2:8000
Year 3:8000
Year 4:8000
Year 5:8000

Cumulative net cash flows:
Year 0:-10000
Year 1:8000-10000=-2000
Year 2:8000-2000=6000
Year 3:8000
Year 4:8000
Year 5:8000

Payback period=1+2000/8000=1.25

Part c:

Year 0:-3000
Year 1:1333
Year 2:1333
Year 3:1333
Year 4:1333
Year 5:1333

Cumulative net cash flows are:

Year 0:-3000
Year 1:1333-3000=-1667
Year 2:1333-1667=-334
Year 3:1333-334=999
Year 4:1333
Year 5:1333

Payback period=2+334/1333=2.25 years

Part d:
Year 0:-3000
Year 1:0
Year 2:1235
Year 3:0
Year 4:1235
Year 5:0
Year 6:1235
Year 7:0
Year 8:1235
Year 9:0
Year 10:1235

Cumulative net cash flows are:
Year 0:-3000
Year 1:0-3000=-3000
Year 2:1235-3000=-1765
Year 3:0-1765=-1765
Year 4:1235-1765=-530
Year 5:0-530=-530
Year 6:1235-530=705
Year 7:0
Year 8:1235
Year 9:0
Year 10:1235

Payback period=5+530/1235=5.429 years