Payson Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $1,200,000 and either has: Even cash flows of $400,000 per year or The following expected annual cash flows: $150,000, $150,000, $400,000, $400,000, and $100,000. Required: Calculate the payback period for each case. Round your answer to one decimal place.

The payback period in case of even cash flows is 3 years.

The payback period in case of uneven cash flows is 5 years.

Explanation:

The payback period is a term used in capital budgeting and is one of the ways of assessing a project. It calculates the time required to recover the total cost invested in the project initially.

Payback period for Even cash flows

Payback period = Number of years till last period + Unrecovered cost at the beginning of the last period for payback / Total cash flows during the last period

The last period here refers to the period in which the cost will be recovered.

The initial cost is $1200000

Recovery till last year of payback = 400000 + 400000 = $800000

Payback period = 2 + 400000 / 400000   = 3 years

Payback under uneven cash flows

Initial cost = $1200000

Recovery till last year of payback = 150000 + 150000 + 400000 +400000 = 1100000

Payback period = 4 + 100000 / 100000  =  5 years

15 pounds of apples and 6 cups of flour

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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