Answered: Calculate the payback period

Business

Accounting

Calculate the payback period

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

100%

The total investment required for a project are estimated at RO 100,000. The cash flows expected from the projects for the first five years are explained in the table below.

Year Project A

Year 1 20000

Year 2 30000

Year 3 35000

Year 4 40000

Year 5 25000

Calculate the payback period

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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