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Hi Mr Moffat
Can you please help with the following: not sure where I am going wrong 🙁
Year Item Cash flow
0 Cost of machine (50000)
1 Net cash flow from sales 22000
2 Net cash flow from sales 22000
3 Net cash flow from sales 20000Cost capital 10% assume all cash flows accrue evenly throughout the year
My workings:
Cumulative
0 (50000)
1 22000 22000
2 22000 44000
3 20000 64000payback period = 2 + 6000/20000 = 2.3
Answers given
A) 1 year 4 months
B) 1 Year 10 months
c) 2 years 4 months
D) 2 years 10 monthsAlso asked for Discounted payback
Same answers given
My workings:
1 22000 x 0.909 19998
2 22000 x 0.826 18172
3 20000 x 0.751 165222 + (50000-38170 / 16522 = 2.716
What am I doing wrong please??
Thanks
Lori
Although I will answer your question, in future if you want me to answer then please ask in the F2 Ask the Tutor Forum – this forum is for students to help each other 🙂
Both your answers are correct.
For the first one, 2.3 years is the same as 2 years 3.6 months, so of the choices the nearest is 2 years 4 months.
For the second one, 2.716 years is the same as 2 years 8.6 months. But neither this nor 2 years 9 months are available answers.
It would appear that (assuming you have typed the question correctly) that the answers are wrong!
(I hope it was not in our test – if it was then please let me know and I will correct it immediately).
Thanks for the answer.
Sorry I thought I was in the correct place, will watch in future !
It was not in your test.Thanks again
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