A firm decides to invest in an asset with an initial cost of Php2 million. Over the next five years, the firm then receives positive cash flows of year 1 = Php900,000, year 2 = Php600,000, year 3= Php400,000, year 4 = Php=300,000 that diminish over time. What is the payback period using the formula below
A firm decides to invest in an asset with an initial cost of Php2 million. Over the next five years, the firm then receives positive cash flows of year 1 = Php900,000, year 2 = Php600,000, year 3= Php400,000, year 4 = Php=300,000 that diminish over time. What is the payback period using the formula below
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk
Section: Chapter Questions
Problem 4MC
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Question
A firm decides to invest in an asset with an initial cost of Php2 million. Over the next five years, the firm then receives positive cash flows of year 1 = Php900,000, year 2 = Php600,000, year 3= Php400,000, year 4 = Php=300,000 that diminish over time. What is the payback period using the formula below.
![Initial Investment - Opening Cumulative Cash Flow
Payback Period =
Closing Cumulative Cash Flow - Opening Cumulative Cash Flow](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F54d4ad49-fddc-4355-8fea-74ecacf404df%2F97dc70f4-1f37-41e4-b6ba-24e0ebd42167%2F5ewuw2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Initial Investment - Opening Cumulative Cash Flow
Payback Period =
Closing Cumulative Cash Flow - Opening Cumulative Cash Flow
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