For years one through five, a proposed expenditure of $250,000 for a fixed asset

Question

For years one through five, a proposed expenditure of $250,000 for a fixed asset with a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000, respectively, and net cash flows of $90,000, $85,000, $75,000, $75,000, and $75,000, respectively. The cash payback period is 3 years.
a. true b. false For years one through five, a proposed expenditure of $250,000 for a fixed asset with a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000, respectively, and net cash flows of $90,000, $85,000, $75,000, $75,000, and $75,000, respectively. The cash payback period is 3 years. a. true b. false

Explanation / Answer

cash recovered in 3 years = $90,000+ $85,000+ $75,000 = $250,000 which is equal to the initial investment. therefore cash payback period is 3 years. a. True

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