I need help with this please: Compute the payback statistic for Project B if the

Question

I need help with this please: Compute the payback statistic for Project B if the appropriate cost of capital is 11 percent and the maximum allowable payback period is three years. (Round your answer to 2 decimal places. If the project never pays back, then enter a "0" (zero).)

I need help with this please: Compute the payback statistic for Project B if the appropriate cost of capital is 11 percent and the maximum allowable payback period is three years. (Round your answer to 2 decimal places. If the project never pays back, then enter a "0" (zero).)

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Payback period is the period within which the initial investment is recovered by the company.

Year 1 Cash Inflow = 3360

Year 2 Cash Inflow = 4200

Year 3 Cash Inflow = 1540

Year 4 Cash Inflow = 0

Year 5 Cash Inflow = 1020

Total Amount Recovered in 5 Years = 3360+4200+1540+0+1020 = $10120 which means that the company is not able to recover its initial investment of $11100 before the minimum acceptable payback period of 3 Years. Therefore, Payback Period is 0.

Answer is 0 Years.

Thanks.

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