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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 $300,000 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. a. fill in the blank 1 years b. fill in the blank 2 years

Answer :

Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period)  =5 years.

The time it takes to recoup the cost of an investment is referred to as the payback period. It is simply the amount of time it takes an investment to break even. The payback period is crucial since people and businesses invest money primarily to be reimbursed. In general, an investment is more appealing the faster its payoff is. Everyone may benefit from knowing the payback period, which can be calculated by dividing the initial investment by the typical cash flows. The payback period is the time required to recoup the cost of an investment or the amount of time required for an investor to break even.

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