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Payback period. What are the payback periods of projects E and F in the following table: E ? Assume all the cash flow is evenly spread throughout the year. If the cutoff period is 3 years, which project(s) do you accept? What is the payback period for project E? ] years (Round to one decimal place.) O Data Table |(Click on the following icon in order to copy its contents into a spreadsheet.) Cash Flow E Cost $36,000 $7,200 $7,200 $7,200 $105,000 Cash flow year 1 Cash flow year 2 Cash flow year 3 Cash flow year 4 Cash flow year 5 Cash flow year 6 $31,500 $42,000 $10,500 $21,000 $0 $0 $7,200 $7,200 $7,200 Print Done

Payback period. What are the payback periods of projects E and F in the following table: E ? Assume all the cash flow is evenly spread throughout the year. If the cutoff period is 3 years, which project(s) do you accept? What is the payback period for project E? ] years (Round to one decimal place.) O Data Table |(Click on the following icon in order to copy its contents into a spreadsheet.) Cash Flow E Cost $36,000 $7,200 $7,200 $7,200 $105,000 Cash flow year 1 Cash flow year 2 Cash flow year 3 Cash flow year 4 Cash flow year 5 Cash flow year 6 $31,500 $42,000 $10,500 $21,000 $0 $0 $7,200 $7,200 $7,200 Print Done

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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### Payback Period for Projects E and F **Objective:** Determine the payback periods for projects E and F based on the provided cash flows. If the cutoff period is 3 years, identify which project(s) to accept. #### Cash Flow Analysis: - **Project E:** - **Initial Cost:** $36,000 - **Cash Flows:** - Year 1: $7,200 - Year 2: $7,200 - Year 3: $7,200 - Year 4: $7,200 - Year 5: $7,200 - Year 6: $7,200 - **Project F:** - **Initial Cost:** $105,000 - **Cash Flows:** - Year 1: $31,500 - Year 2: $42,000 - Year 3: $10,500 - Year 4: $21,000 - Year 5: $0 - Year 6: $0 #### Payback Period Calculations: - **Project E:** - Year 1: $7,200 - Year 2: $7,200 (Cumulative: $14,400) - Year 3: $7,200 (Cumulative: $21,600) - Year 4: $7,200 (Cumulative: $28,800) - Year 5: $7,200 (Cumulative: $36,000) The payback period for Project E is 5 years. - **Project F:** - Year 1: $31,500 - Year 2: $42,000 (Cumulative: $73,500) - Year 3: $10,500 (Cumulative: $84,000) - Year 4: $21,000 (Cumulative: $105,000) The payback period for Project F is 4 years. #### Decision: - If the cutoff period is 3 years, neither Project E nor Project F meets this criterion, as both projects have payback periods longer than 3 years.
Transcribed Image Text:### Payback Period for Projects E and F **Objective:** Determine the payback periods for projects E and F based on the provided cash flows. If the cutoff period is 3 years, identify which project(s) to accept. #### Cash Flow Analysis: - **Project E:** - **Initial Cost:** $36,000 - **Cash Flows:** - Year 1: $7,200 - Year 2: $7,200 - Year 3: $7,200 - Year 4: $7,200 - Year 5: $7,200 - Year 6: $7,200 - **Project F:** - **Initial Cost:** $105,000 - **Cash Flows:** - Year 1: $31,500 - Year 2: $42,000 - Year 3: $10,500 - Year 4: $21,000 - Year 5: $0 - Year 6: $0 #### Payback Period Calculations: - **Project E:** - Year 1: $7,200 - Year 2: $7,200 (Cumulative: $14,400) - Year 3: $7,200 (Cumulative: $21,600) - Year 4: $7,200 (Cumulative: $28,800) - Year 5: $7,200 (Cumulative: $36,000) The payback period for Project E is 5 years. - **Project F:** - Year 1: $31,500 - Year 2: $42,000 (Cumulative: $73,500) - Year 3: $10,500 (Cumulative: $84,000) - Year 4: $21,000 (Cumulative: $105,000) The payback period for Project F is 4 years. #### Decision: - If the cutoff period is 3 years, neither Project E nor Project F meets this criterion, as both projects have payback periods longer than 3 years.
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