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Ventura Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $3,000,000 and either has (a) even cash flows of $750,000 per year or (b) the following expected annual cash flows: $375,000, $375,000, $1,000,000, $1,000,000, and $250,000.

Respuesta :

Answer:

4 years

5 years

Explanation:

Ventura Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $3,000,000 and either has:

a. Even cash flows of $750,000 per year or

b. The following expected annual cash flows: $375,000, $375,000, $1,000,000, $1,000,000, and $250,000

Calculate the paycheck period for each case

a. ? years

b. ? years

Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows

Payback period = Amount invested / cash flow

3,000,000 / 750,000 = 4 years

b. the sum of the cash flows is 3,000,000. thus the amount invested would be recovered in 5 years

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