Question

Problem 13-5 payback (lg13-2) following is the set of cash flows from project b which has a cost of capital of 12 percent and the maximum allowable payback period is three years. (if the project never pays back, then enter a "0" (zero).) project b time: 0 1 2 3 4 5 cash flow: −$11,000 $3,350 $4,180 $1,520 $0 $1,000 does the project achieve payback within the first three years?

Answer 1

The project achieves payback within the first three years.

Step-by-step explanation:

Project B's cash flows are as follows:

Time: 0 1 2 3 4 5

Cash Flow: -$11,000 $3,350 $4,180 $1,520 $0 $1,000

The payback period is the time it takes for an investment to recover its initial cost. To calculate the payback period, we need to determine when the cumulative cash flows become equal to or greater than zero. From the cash flows given, we can see that the cumulative cash flows become equal to or greater than zero in year 3. Therefore, the project achieves payback within the first three years.