Question
Asked Dec 1, 2019

Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.)

 

Project A            
Time: 0 1 2 3 4 5
Cash flow: –$2,600 $990 $960 $840 $620 $420
 

 

 

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Expert Answer

Step 1

Calculation of Payback Period:

The payback period is 2.77 years.

Excel Spreadsheet:

...
Вв
с
Year Cash Flows Cum Cash Flows
($2,600)
($1,610)
($650)
1
0
($2,600)
$990
1
2
$960
4
5
3
$840
$190
6
$620
$810
7
$420
$1,230
Payback Period
2.77
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Вв с Year Cash Flows Cum Cash Flows ($2,600) ($1,610) ($650) 1 0 ($2,600) $990 1 2 $960 4 5 3 $840 $190 6 $620 $810 7 $420 $1,230 Payback Period 2.77

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