The WhalesRUs Company wants to calculate how long it will take to recover their initial investment on
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Question:
The WhalesRUs Company wants to calculate how long it will take to recover their initial investment on a project, Project X. It is assumed that the estimated cash flows are received evenly throughout the year.
Cost 100,000
Year 1 $53,000
Year 2 $35,000
Year 3 $30,000
Year 4 $ 100,000
a) What is the payback period? (Give partial year to two decimal places.
b) Compared to another project, Project Y, with a payback period of 3 years, which project should be chosen?
c) In evaluation of this Project X, what is the primary drawback of the payback method?
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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