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Financial Question

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Subject
Business
School
Auburn University-Montgomery
Type
Homework
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Finance Question
Suppose the discount rate for both projects is 12%, and the management’s cutoff is 2.75 years.
Please calculate the payback period for the two investments
Payback period is the number of years that it takes for an investment to recover its initial outplay.
Western Europe Expansion
Annual
Cashflow
Cumulative
Cashflows
Initial
Outlay
($250)
($250)
Year 1
Inflow
$35
($215)
Year 2
Inflow
$80
($135)
Year 3
Inflow
$130
($5)
Year 4
Inflow
$160
$155
Year 5
Inflow
$175
$330
Payback Period
Accounting payback period = 3 years + (5/160)
Accounting payback period = 3.03125 years
Southeast U.S. Toehold
Annual
Cashflow
Cumulative
Cashflows
Initial
Outlay
($50)
($50)
Year 1
Inflow
$18
($32)
Year 2
Inflow
$22
($10)
Year 3
Inflow
$25
$15
Year 4
Inflow
$30
$45
Year 5
Inflow
$32
$77
Payback Period

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Finance Question Suppose the discount rate for both projects is 12%, and the management’s cutoff is 2.75 years. Please calculate the payback period for the two investments Payback period is the number of years that it takes for an investment to recover its initial outplay. Western Europe Expansion Annual Cashflow Initial Outlay Year 1 Inflow Year 2 Inflow Year 3 Inflow Year 4 Inflow Year 5 Inflow Payback Period Cumulative Cashflows ($250) ($250) $35 ($215) $80 ($135) $130 ($5) $160 $155 $175 $330 Accounting payback period = 3 years + (5/160) Accounting payback period = 3.03125 y ...
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