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AlekseyPX
3 years ago
5

Ribelin Corporation is adding a new product line that will require an investment of $218,000. The product line is estimated to g

enerate cash inflows of $32,000 the first year, $18,000 the second year, and $21,000 each year thereafter for ten more years. What is the payback period? A. 856 years B. 10.42 years C. 10.00 years D. 11.17 years
Business
1 answer:
Vikentia [17]3 years ago
6 0

Answer:

C. Payback is 10 years

Explanation:

Payback is the number of years it will takes to recover the initial investment, which in this case translates to: how long will it take for Ribelin Corpration to recover the  $218,000 investment given the stated cash-flows.

Year Cash-flow     Balance

0        (218,000.00)        (218,000.00)

1        32,000.00            (186,000.00)

2        18,000.00            (168,000.00)

3        21,000.00             (147,000.00)

4         21,000.00             (126,000.00)

5        21,000.00              (105,000.00)

6        21,000.00              (84,000.00)

7        21,000.00               (63,000.00)

8       21,000.00                (42,000.00)

9        21,000.00               (21,000.00)

10        21,000.00                -    

11        21,000.00             21,000.00  

12        21,000.00            42,000.00  

By end of year 10, total inflows are exactly equal the initial investment, therefore it will take them 10 years

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