Ask Question
BusinessBusiness
12 March, 02:42

Digital Corp is considering investing in project A. Their accountants gave them the following information: Initial investment: $1,200,000 Salvage Value: $340,000 Contribution Margin: $320,000 Present Value of Cash Flows: 4,580,000 Annual Cash Inflow: $850,000 Cost of Capital: 9% Length of project: 5 years What is the payback period

+5
Answers (1)
  1. 12 March, 03:03
    0
    The payback period for the investment is 1.41 years

    Explanation:

    The payback period is the length of time it takes an investment to repay back the investment capital outlay committed to it at the inception of the project.

    The payback period is computed as the initial investment divided by annual cash inflow

    Initial investment is $1,200,000

    Annual cash inflow is $850,000

    Payback period=$1,200,000/$850,000 = 1.41 years

    We can express the 0.41 in months=0.41*12=4.92 approximately 5 months
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Digital Corp is considering investing in project A. Their accountants gave them the following information: Initial investment: $1,200,000 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
What would be a best practice when managing the merchandise at a store? A. make sure that all products are bought from the same vendor B. make sure that products displayed (sold) near each other are of similar categories C.
Answers (2)
A bank must maintain an average daily balance at the Fed of $600. In the first 2 days of the maintenance period, they maintain a balance of $450, the next three days they maintain a balance of $700, the next two days they maintain a balance of $650,
Answers (1)
Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend in one year, and its equity cost of capital is 15%. What price must you expect it to sell for right after paying the dividend in one year in order to justify its current price
Answers (1)
An outside supplier has offered to provide the annual requirement of 5,500 of the parts for only $13 each.
Answers (1)
Serfass Corporation's contribution format income statement for July appears below: Sales $353,800 Variable expenses 194,590 Contribution margin 159, 210 Fixed expenses 65,280 Net operating income $93,930 The degree of operating leverage is closest
Answers (1)
New Questions in Business
That the total dollar amount of the debits equals the total dollar amount of the credits in the ledger accounts can be verified through a (n) a. balance sheet b. trial balance c. chart of accounts d. income statement
Answers (1)
Coronado Shoes Fool Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case.
Answers (1)
Suppose during 2014 that Federal Express reported the following information (in millions) : net sales of $35,497 and net income of $98.
Answers (2)
During a certain four-year period, the consumer price index (CPI) increased by 30%, but during the next four-year period, it increased by only 10%. Which of these conditions must have existed during the second four-year period? A. Deflation B.
Answers (2)
Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct materials requirement per unit is 2 ounces (oz.).
Answers (1)
Home » Business » Digital Corp is considering investing in project A. Their accountants gave them the following information: Initial investment: $1,200,000 Salvage Value: $340,000 Contribution Margin: $320,000 Present Value of Cash Flows: 4,580,000 Annual Cash
Sign Up Forgot Password?