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Arturiano [62]
4 years ago
12

X-treme Vitamin Company is considering two investments, both of which cost $22,000. The cash flows are as follows: Year Project

A Project B 1 $ 25,000 $ 22,000 2 12,000 11,000 3 8,000 14,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B.
Business
1 answer:
olga2289 [7]4 years ago
4 0

Answer:

0.88 year and 1 year

Explanation:

The computation of the payback period for Payback period for Project A and Project B is shown below:

Payback period = Initial investment ÷ Net cash flow

For Project A

Initial investment = $22,000

Year 1 = $25,000

Since the initial investment is less than the annual cash flows so the payback period is

= 0 years + ($22,000 ÷ $25,000)

= 0.88 years

For Project B

Initial investment = $22,000

Year 1 = $22,000

So, the payback period is

= $22,000 ÷ $22,000

= 1 year

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The correct answer is it becomes variable cost.

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3 years ago
Swan Corporation makes a property distribution on 12/31/13 to its sole shareholder, Matthew. The property distributed is a cotta
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