Exercise 26-3 (Algo) Payback period and unequal cash flows LO P1Beyer Company is considering buying an asset for $400,000. It is expected to produce the following net cash flows.Year 2$80,000YearInitial investmentYear 1Year 2Year 3Year 4Year 5TotalYear 1$80,000Net cash flowsCompute the payback period for this investment.Note: Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.Net Cash Flows$(400,000)Payback period=>Year 3$70,000Cumulative CashFlowsYear 4$200,000Year 5$15,000

The payback period is one of the important Capital Budgeting Techniques. The payback period is the…

Beyer Company is considering buying an asset for $400,000. It is expected to produce the following net cash flows. Year 5 $15,000 Net cash flows Year 1 $80,000 Year 2 $80,000 Year 3 $70,000 Year 4 $200,000

Beyer Company is considering buying an asset for $400,000. It is expected to produce the following net cash flows. Year 5 $15,000 Net cash flows Year 1 $80,000 Year 2 $80,000 Year 3 $70,000 Year 4 $200,000

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Exercise 26-3 (Algo) Payback period and unequal cash flows LO P1
Beyer Company is considering buying an asset for $400,000. It is expected to produce the following net cash flows.
Year 2
$80,000
Year
Initial investment
Year 1
Year 2
Year 3
Year 4
Year 5
Total
Year 1
$80,000
Net cash flows
Compute the payback period for this investment.
Note: Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.
Net Cash Flows
$
(400,000)
Payback period=>
Year 3
$70,000
Cumulative Cash
Flows
Year 4
$200,000
Year 5
$15,000

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