Question

year investment cash inflow 1 $ 58,000 $ 4,000 2 $ 8,000 $ 8,000 3 $ 11,000 4 $ 14,000 5 $ 17,000 6 $ 15,000 7 $ 13,000 8 $ 11,000 9 $ 10,000 10 $ 10,000

Answer 1

In 5.8 yeas, the invested amount is recovered.  

Any inflows or outflows of cash from a company's long-term investments are included in cash flow from investing activities. The cash flow statement shows how much cash and cash equivalents are coming into and going out of a business.

If the cash inflow in the previous year had been several times as large, the payback period would not be impacted.

Calculation:

In the payback, we analyze in how many years the invested amount is recovered. The computation is shown below:

In year 0 = $58,000 + $8,000 = $66,000

In year 1 = $4,000

In year 2 = $8,000

In year 3 = $11,000

In year 4 = $14,000

In year 5 = $17,000

In year 6 = $15,000

If we sum the first 5 year cash inflows than it would be $54,000

Now we deduct the $54,000 from the $66,000 , so the amount would be $12,000 as if we added the sixth year cash inflow so the total amount exceed to the initial investment. So, we deduct it

And, the next year cash inflow is

Martinemaberry6932 Martinemaberry6932

• 30-11-2022
• Business

contestada

year investment cash inflow 1 $ 58,000 $ 4,000 2 $ 8,000 $ 8,000 3 $ 11,000 4 $ 14,000 5 $ 17,000 6 $ 15,000 7 $ 13,000 8 $ 11,000 9 $ 10,000 10 $ 10,000

Respuesta :

15,000

So, the payback period equal to

= 5 years + $12,000 ÷ $15,000

= 5.8 yeas

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