Question

 Ans. 3 Year Cash inflows Cummulative Cash Inflows 1 \$44,000 \$44,000 2 \$58,500 \$102,500 3 \$87,600 \$190,100 4 \$87,600 \$277,700 5 \$87,600 \$365,300 6 \$87,600 \$452,900 7 \$87,600 \$540,500 8 \$87,600 \$628,100 9 \$87,600 \$715,700 10 \$87,600 \$803,300 Payback period = Completed years + (Investment - Cummulative cash flow of completed year) / Cash inflow of next year 4 + (\$325,000 - \$277,700) / \$87,600 4 + \$47,300 / \$87,600 4 + 0.54 4.54   years No. of completed years consist of the years in which the Sum of cash inflows are the nearest lower value than investment. Cummulative Cash Inflows = Cash inflow of current year + Sum of previous year cash inflows

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