A $1,530,030 expenditure will be needed to introduce a new product line to hardware. The managers predict that this investment will last for ten years and produce net cash inflows in the first year, second year, and every year after that for eight years. No residual value exists for the investment. figure out the payback period.
After 5 years, have received $1,360,000
Total left: $1,500,000 - $1,360,000 = $140,000
Will be receiving $250,000 in Year 6....
Payback = 5 years + (140,000 /250,000)
Payback = 5.56 years
Generally speaking, the phrase "investing" refers to putting money to work over a period of time in a project or other endeavour with the intention of making money (i.e., profits that exceed the amount of the initial investment). It is the act of distributing assets, most often capital (i.e., money), with the expectation of generating income, profits, or gains. A person may engage in a number of actions (directly or indirectly), such as using funding to start a business or purchasing assets like real estate in the intention of making rental income or profitably flipping it later. Allocating money (capital) to activities or results that are expected to generate a return over the long term is known as investing.
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