Question

Payback Period Payson Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $1,200,000 and either has: Even cash flows of $300,000 per year or The following expected annual cash flows: $150,000, $150,000, $400,000, $400,000, and $100,000. Required: Calculate the payback period for each case.

Answer 1

Answer:

4 years

5 years

Explanation:

The payback period measures how long it takes for the amount invested in a project to be recovered from the cumulative cash flow.

The amount invested were recovered at the year where cumulative cash flow became zero.

Explanations on how the payback periods were calculated can be found in the attached images.

I hope my answer helps you