Question

A project costs Rs.160000.The estimated annual cash inflows during its 3 year life are Rs.80000,Rs.70000 and Rs.60000 respectively. The pay back period
will be​

Answer 1

anual cash inflows are: 8000+ 7000+6000=21000

investment=16000

21000-16000=5000

6000/5000 = 1.2 months

16000/15000=1.067years

1.067+1.2=2.267 years

Explanation:

there are three years first year 8000 second year 7000 3rd year 6000 first 8000+7000 gives 15000 and 1000 is taken from the 3rd year so 6000 is divided by 5000 which is the balance of 16000 - 21000.

Answer 2

Answer:

Concept:

The payback period is the time you need to recoup the cost of your investment. Simply put, it is the time it takes for an investment to break even. It would help if you get the investment cost of the project as soon as possible to make a profit. The payback period shows the time required to cover the cost of the project. The payback period will help you evaluate the associated risks of the investment. An investment can have a short or long payback period. If your investment has a short payback period, you can quickly recoup the cost of the investment. You can choose a project or investment with a short payback period. The payback period in capital budgeting indicates the number of years it will take to recoup the cost of your investment.

Find:

We have find the pay back period

Given:

A project costs Rs.160000.The estimated annual cash inflows during its 3 year life are Rs.80000,Rs.70000 and Rs.60000 respectively

Explanation:

anual cash inflows are 80000+ 70000+60000 = 210000

investment=160000

210000-160000= 50000

$pay \: back \: period = \frac{60000}{50000} + \frac{160000}{150000}$

Pay back period = 1.067+1.2

Pay back period = 2.267 years

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