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Logan Farms is evaluating the feasibility of a new grain elevator. The farm requires a...

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Finance

Logan Farms is evaluating the feasibility of a new grain elevator. The farm requires a payback of 2 years. Given the following cost/cash flow estimates, should the grain elevator be purchased?

Initial Cost Period Cash flows

$5,000,000 1 2,500,000

2 2,800,000

3 2,600,000

4 1,200,000

  1. Yes: the payback is less than 2 years.
  2. Yes: the payback is less than 2.5 years.
  3. No: the payback is more than 2 years.
  4. No: the payback is more than 3 years.
  5. More information is needed to answer this question.

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