Hernandez, Digna C. Mr.

Romel Cayabyab
ACC C309-301 November 18, 2021
Payback Period Satwork
1. An investment opportunity costing $55,000 is expected to yield net cash flows of $22,000
annually for five years. The payback period of the investment is

Answer:
Year Cash inflow Unrecovered Investment
1 $22,000 $33,000
2 22,000 11,000
3 22,000
Payback Period is 2.5 or 2 years and 6 months

Solution
= 2 years + (unrecovered investment / year 3 cash inflow)
= 2 + (11,000/22,000)
= 2 + 0.5
= 2.5 years or 2 years and 6 months
2. An investment opportunity costing $100,000 is expected to yield net cash flows of $22,000
annually for seven years. The payback period of the investment is

Answer:
Year Cash inflow Unrecovered Investment
1 $22,000 $78,000
2 22,000 56,000
3 22,000 34,000
4 22,000 12,000
5 22,00
Payback Period is 4.55 or 4 years and 7 months (rounded off)

Solution
= 4 years + (unrecovered investment / year 5 cash inflow)
= 4 + (12,000/22,000)
= 4 + 0.55
= 4.55 years or 4 years and 7 months

3. An investment opportunity costing $180,000 is expected to yield net cash flows of $60,000
annually for five years. Find the payback period of the investment.

Answer:
Year Cash Inflow Unrecovered Investment
1 $60,000 $120,000
 2 60,000 60,000
3 60,000 0

Payback Period is 3.0 or 3 years

4. Scottso has an investment opportunity costing $300,000 that is expected to yield the following
cash flows over the next six years: Year One $75,000 Year Two $90,000 Year Three $115,000
Year Four $130,000 Year Five $100,000 Year Six $90,000
Find the payback period of the investment.

Answer:
Year Cash Inflow Unrecovered Investment
1 $75,000 $225,000
2 90,000 135,000
3 115,000 20,000
4 130,000

Payback Period is 3.15 or 3 years and 2 months (rounded off )

Solution
= 3 years + (unrecovered investment / year 4 cash inflow)
= 3 + (20,000/130,000)
= 3 + 0.15
= 3.15 or 3 years and 2 months (rounded off)