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Please use the formula not the excel sheet.
a. Calculation of undiscounted payback period
|Year||Cash Flow||Cumulative Cash Flow|
|8||$9,000 + $10,000 (Salvage Value)||$62,500|
Initial cost = $30,000
Undiscounted payback period = 5 year + (Initial cost - Cash inflow recovered from 5 years)/ Cash flow of 6th year
= 5 year + ($30,000 - $27,000)/ $8,000
= 5 year + $3,000/$8,000
= 5 year + 0.375 year = 5.375 years
b. Calculation of net present value
|Year||Cash Flow||Present Value Factor @ 6%||Present Value|
|0||($30,000) Initial Cost||1||($30,000)|
|8||$9,000 + $10,000 (Salvage Value)||0.6274||$11,920.60|
|Net Present Value||$15,160.80|
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