Question

Beyer Company is considering the purchase of an asset for $370,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 86,000 $ 49,000 $ 70,000 $ 300,000 $ 12,000 $ 517,000 Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal place.)

Answer 1

Answer:

3.55 years

Explanation:

The payback period is the length of time it takes for Beyer Company to recoup the initial investment of  $370,000.

In other words, the number of years for the net cash flows of the project to equate the initial investment amount of $370,000 as shown in the attached excel file for Beyer company's payback computation

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