Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. beyer company is considering the purchase of an as

Beyer Company is considering the purchase of an asset for $270,000. It is expected to produce...

Free

60.1K

Verified Solution

Question

Accounting

Beyer Company is considering the purchase of an asset for$270,000. 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

$

66,000

$

39,000

$

67,000

$

200,000

$

22,000

$

394,000


Compute the payback period for this investment. (Cumulativenet cash outflows must be entered with a minus sign. Round yourPayback Period answer to 2 decimal place.)

Year

Cash inflow (Outflow)

Cumulative Net Cash Inflow (Outflow)

0

1

2

3

4

5

Payback period =

years

Answer & Explanation Solved by verified expert
4.0 Ratings (453 Votes)

answer
Payback period is 3.49 years (see solutions)
year cash inflow (outflow) cumulative net cash inflow (outflow)
0 -270000 -270000
1 66000 -204000
2 39000 -165000
3 67000 -98000
4 200000 102000
5 22000 124000
solution
year annual net cash flow cumulative net cash flow
1 66000 66000
2 39000 105000
3 67000 172000
4 200000 372000
5 22000 394000
cost of investment 270000 part of year = amount paid back in 4th year/net cash flow in 4th year
less: paid back in 1-3 year -172000                          = 98000 / 200000
partly in 4th year 98000                          = 0.49
pay back period = 3 + 0.49 = 3.49 years

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Accounting
1.2K views

Problem 1A subsidiary of J & J Products is in the process of preparinginterim...Problem...

Mechanical Engineering
1.2K views

Consider a large tank holding 50 gal of pure water into which a brine solution of...

Accounting
1.2K views

Q1. Relate the Sarbanes-Oxley Act with global convergence of the financial reporting standards. Q2. Sketch the concept...

Biology
1.2K views

A difference between a political party and an interest group is that the main goal...

Physics
1.2K views

42 Hot water at 50 C is routed from one building in which it is...

Physics
1.2K views

iv The magnitude of area of the parallelogram formed by the adjacent sides of vectors...

Geometry
1.2K views

Identify the center and radius of the circle x y 3 16 center x y...

Calculus
1.2K views

1 point Use the Wronskian to show that the functions y e x and y...

Accounting
1.2K views

A company is considering an iron ore extraction project that requires an initial investment of...

Accounting
1.2K views

Received customer payment of $820 to ship several items to Philadelphia next month. Note: Enter...

Accounting
1.2K views

Schopp Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following...

Finance
1.2K views

1. Consider a European put option on Modana with a strike price of $40 and...