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folsom advertising, inc. is considering an investment in a new information system. the new system requires an investment of $1,800,000 and either has even cash flows of $750,000 per year or the following expected annual cash flows: $450,000, $225,000, $600,000, $600,000, and $150,000. required: calculate the payback period for each case. note: round final answers to one decimal place.

Respuesta :

The payback period is 2 years and 5  months and the other Payback period=3 years and 8 months

The payback period is the total length of time it takes for an investment to be recouped through the cash flows it generates. It is a measure of the time it takes for an investment to pay for itself.

Calculating the payback period for each case -

a)

Total cash flow for two years

= 750 × 2

= 1500.000

Balance of cash flow = 1800,000 - 1500,000  

= 300,000

Payback period

= 2 years + (300,000/750,000) × 12months

=  2 years 5  months

b)

Total cash flow for three years

= 450,000 + $225,000 + 600,000

=1,275,000

Balance o cash flow =

= 1,800,000 -1275,000

= 525,000

Pay back period

= 3 years + (525,000/750,000) × 12 months

= 3 years  8 months

Read more about the payback period on:

https://brainly.com/question/23149718

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