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11 20 12 Review
11 20 12 Review
1. TheSeattleCorporationhasbeenpresentedwithaninvestmentopportunitywhichwill
yieldcashflowsof$30,000peryearinYears1through4,$35,000peryearinYears5
through9,and$40,000inYear10.Thisinvestmentwillcostthefirm$150,000today,and
thefirm'srequiredrateofreturnis10percent.Assumecashflowsoccurevenlyduring
theyear,1/365theachday.Whatisthepaybackperiodforthisinvestment?
Year
ProjectA
ProjectB
$50,000
$~~50,000
~~~15,990
~~~15,990
~~~15,990
~~~15,990
~~~15,990
100,560