Question
Asked Dec 11, 2019
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The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:

 

Year Investment Cash Inflow
1 $ 58,000 $ 4,000
2 $ 8,000 $ 8,000
3     $ 11,000
4     $ 14,000
5     $ 17,000
6     $ 15,000
7     $ 13,000
8     $ 11,000
9     $ 10,000
10     $ 10,000
 

 

Required:

1. Determine the payback period of the investment.

2. Would the payback period be affected if the cash inflow in the last year were several times as large?

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Expert Answer

Step 1

1.

Determine the payback peri...

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Investment Cash flow Uncovered Year in $ in S in $ 58,000 54,000 4,000 8,000 11,000 14,000 17,000 15,000 13,000 11,000 10,000 10,000 8,000 54,000 43,000 29,000 12,000 3 4 10 12,000 Payback period= 5+. 15,000 =5.8 years

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