Question

5) The management of Sturdy Corporation, a construction company, is considering an investment in a high rise building with the following cash flows Investment Year Cash Inflow 2-0- 4,000,000.00 8,000,000.00 9,000,000.00 P38,000,000.00 6,000,000.00 4 12,000,000.00 10,000,000.00 6 8 9 10 8,000,000.00 6,000,000.00 5,000,000.00 3,000,000.00 Required Determine the payback period of the investment.

Answer 1

Cash flows Cumulative cash flows 38,000,000 -40,000,000 32,000,000 23,000,000 11,000,000 -1,000,000 7,000,000 13,000,000 18,000,000 21,000,000 Year 38,000,000 2,000,000 8,000,000 9,000,000 12,000,000 10,000,000 8,000,000 6,000,000 5,000,000 3,000,000 7 9 10 Payback period- 6.13 Years 6+1,000,000/8,000,000