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Mendez Company is considering a capital project that costs $16,000. The project will deliver the following cash flows: Year 1 Year 2 Year 3 Year 4 Year 5 $8,000 $6,000 $5,000 $6,000 $5,000 Using the incremental approach, the payback period for the investment is:

Respuesta :

Tundexi

Answer:

2.4 years

Explanation:

Years  Cash   Cumulative Cashflow

1          8000         8000

2         6000         14000

3          5000        19000

4          4000        25000

5          5000        30000

           30000

Payback period = 2 years + (16,000 - 14,000) / 5,000

Payback period = 2 years + 0.4 years

Payback period = 2.4 years

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