An investment of $100,000 will begin returning $11,600 annually at the end of the second year...

4.0 Ratings (673 Votes)

1) Calculation of Payback period
Time	Amount	Cumulative
-	(1,00,000.00)	(1,00,000.00)
1.00	-	(1,00,000.00)
2.00	11,600.00	(88,400.00)
3.00	11,600.00	(76,800.00)
4.00	11,600.00	(65,200.00)
5.00	11,600.00	(53,600.00)
6.00	11,600.00	(42,000.00)
7.00	11,600.00	(30,400.00)
8.00	11,600.00	(18,800.00)
9.00	11,600.00	(7,200.00)
10.00	11,600.00	4,400.00
11.00	11,600.00

PBP= 9+7200/11600
Payback period= 9.62 years
So correct answer is C) 9.6 years

2) Calculation of Payback period
Time	Amount	Cumulative
-	(10,00,000.00)	(10,00,000.00)
1.00	(3,50,000.00)	(13,50,000.00)
2.00	4,50,000.00	(9,00,000.00)
3.00	6,75,000.00	(2,25,000.00)
4.00	8,00,000.00	5,75,000.00

PBP= 3+225000/800000
Payback period= 3.28 years
So correct answer is B) 3.3 years

3) Statement showing NPV
Particulars	Time	PVf 8.5%	Amount	PV
Cashoutflow	-	1.0000	(1,40,000.00)	(1,40,000.00)
Cash Flows	1.00	0.9217	35,000.00	32,258.06
Cash Flows	2.00	0.8495	52,000.00	44,171.67
Cash Flows	3.00	0.7829	64,000.00	50,106.12
Cash Flows	4.00	0.7216	48,000.00	34,635.57
NPV				21,171.42
So correct answer is A) $21171

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