Maria and Jim have agreed on the objective to help with a canned food drive this week. They want to hang posters around local ne
1 answer:
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Answer: 3.5 years
Explanation:
Investment A:
Initial capital investment = $105,000
Estimated useful life = 10 years
Estimated residual value = 0
Estimated annual net cash inflow for 10 years = $30,000
Required rate of return = 12%
Year Cash Flow Accumulated Cash flow
0 -$105,000 -$105,000
1 $30,000 -$75,000
2 $30,000 -$45,000
3 $30,000 -$15,000
4 $30,000 $15,000
Hence, at the end of 4th year the accumulated cash flow become positive. Therefore,
The pay back period for investment A = 3 +
= 3 + 0.5
= 3.5 years