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
