FIN341EXERCISE#6

FIN 475/575 Exercise#9

FIN 341 Exercise#6 - PAYBACK Payback Method formula = add up the years cash flow until you get to the initial investment but not over (this is your whole number such as 2.??) then divide the last cash flow number by that years cash flow to get the hundredth decimals) Payback shows how many YEARS it takes to recover the initial investment.

A. II (Initial Investment) = $10,000, year 1 to 6 cash flow is $3,000, $4,000, $6,000, $5,000, $3,000, and $2,000. $3,000 (year 1 cf) + $4,000 (year 2 cf) = 2.xx years + $3,000/$6,000 = .50 years 2.50 years payback method to recover the $10,000 Initial Investment. Notice that years 4 to 6 are ignored.

1. II = $120,000 year 1 to 5 cash flow $40,000, $50,000, $80,000, $100,000, and $125,000. Calculate the years payback.

2. II = $240,000 year 1 to 5 cash flow is $60,000, $70,000, $80,000, $90,000, and $100,000. Calculate the years payback.

3. II = $400,000 year 1 to 3 cash flow is $300,000, $500,000, and $800,000. Calculate the years payback.

4. II = $500,000 year 1 to 5 cash flow is $100,000, $150,000, $200,000, $250,000, and $300,000. Calculate the years payback.

5. II = $800,000 year 1 to 4 cash flow is $300,000, $400,000, $600,000, and $800,000. Calculate the years payback.

6. II = $1,000,000 year 1 to 5 cash flow is $200,000, $325,000,

$400,000, $450,000, and $500,000. Calculate the years payback.

7. II = $2,400,000 year 1 to 4 cash flow is $800,000, $900,000, $1,000,000, and $1,200,000. Calculate the years payback.

8.II = $700,000 year 1 to 5 cash flow is $120,000, $170,000, $240,000, $300,000, and $360,000. Calculate the years payback.9.II = $400,000 year 1 to 5 cash flow is $80,000, $90,000, $150,000, $180,000, and $200,000. Calculate the years payback10. II = $280,000 year 1 to 5 cash flow is $50,000, $60,000, $90,000, $120,000, and $150,000. Calculate the years payback.

End of Exercise#6 FIN 341