\ (Ignore income taxes in this problem.) The Zinger Corporation is considering an investment that has...
\
| (Ignore income taxes in this problem.) The Zinger Corporation is considering an investment that has the following data: |
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Investment | $18,000 | $5,000 | |||
| Cash inflow | $4,000 | $4,000 | $11,000 | $6,000 | $6,000 |
| Cash inflows occur evenly throughout the year. The payback period for this investment is: (Round your answer to 1 decimal place) |
Homework Answers
Payback Period = ( Last Year with a Negative Cash Flow ) + [( Absolute Value of negative Cash Flow in that year)/ Total Cash Flow in the following year)]
= 3 + ( 4,000 / 6,000 )
=3.67 Years
= 3.7 Years
Hence the correct answer is 3.7 Years
| Year | Investment | Cash Inflow | Net Cash Flow | |
| 1 | -18,000 | 4,000 | -14,000 | (Investment + Cash Inflow) |
| 2 | -5,000 | 4,000 | -15,000 | (Net cash Flow +Investment + Cash Inflow) |
| 3 | - | 11,000 | -4,000 | (Net Cash Flow + Cash Inflow) |
| 4 | - | 6,000 | 2,000 | (Net Cash Flow + Cash Inflow) |
| 5 | - | 6,000 | 8,000 | (Net Cash Flow + Cash Inflow) |
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