Example of payback period method, Finance Basics

Assignment Help:

Example of Payback Period Method

Suppose a project costs Sh.80,000 and will produce the following cash inflows as:

                                 Cash inflows      Accumulated inflows

Inflows year 1 =          10,000               10,000

Inflows year 2 =          30,000               40,000

Inflows year 3 =          15,000               55,000

Inflows year 4 =          20,000               75,000

Inflows year 5 =          30,000               105,000

The Sh.80, 000 costs is recovered between year 4 and 5. Throughout year 5 (after year 4) Sh.5, 000 is (80,000 - 75,000) is required out the total year 5 cash flows of 30,000

Hence the PBP = 4yrs+ (5,000/30,000)                                              

= 4.17 years


Related Discussions:- Example of payback period method

Calculate the total increment prize, Prudence buys a bond in EUR when it is...

Prudence buys a bond in EUR when it issued by the French government and inflation linked.  It offers a 2% yearly coupon.  She holds it for five years.             Par value: EUR

Compute the payback period - example, Compute the Payback Period - Example ...

Compute the Payback Period - Example Cedes restriction has the following details of two (2) of the future production plans. Just one of these machines will be purchased and su

Credit standards, Credit Standards A firm may follow a stringent or a ...

Credit Standards A firm may follow a stringent or a lenient credit policy. The firm subsequent of a lenient credit policy tends to sell on credit to customers on extremely lib

T accounts, Accounting Exercise AVM 386 Fall 2014 Misty Mark, an infamous ...

Accounting Exercise AVM 386 Fall 2014 Misty Mark, an infamous archer, decided to open an archery business called Bows and Biceps. The following is a list of transactions for Bows

Define financial factors that influence value of a business, List and expla...

List and explain the three financial factors that influence the value of a business. Ans: The three issues that influence the value of a firm's stock price are cash flow , ti

Financial forecasting, Financial Forecasting Financial forecasting ref...

Financial Forecasting Financial forecasting refers to determination of the firm of financial requirements in advance. Financial forecasting is needs financial planning using b

Assignment, Discuss the applicabilty of an operating cycle to poultry busin...

Discuss the applicabilty of an operating cycle to poultry business(consider broilers)

Effective financial management, Financial management is very important for ...

Financial management is very important for any organization as at the end what does matter is the money. An effective financial management is of high importance for ensuring the be

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd