# Susmel Inc. is considering a project that has the following cash flow data. What is the project's payback? Year 0 1 2 3 Cash flows -\$500 \$150 \$200 \$300 2.03 years 2.25 years 2.50 years 2.75 years 3.03 years

Payback period = 2.5 years

Explanation:

given data

Year    0            1           2           3

cash    -\$500  \$150   \$200   \$300

to find out

What is the project's payback

solution

Year        Cash flows   Cumulative Cash flows

0                 500             500

1                  150              350

2                 200             150

3                 300              150

so

Payback period = Last period with a negative cumulative cash flow +(Absolute value of cumulative cash flows at that period ÷ Cash flow after that period)      .........................1

put here value we get

so

Payback period =

Payback period = 2.5 years

The payback period for the project is approximately 2.75 years.

### Explanation:

The payback period is a financial metric used to assess the time it takes for an investment or project to generate enough cash flows to recover the initial investment cost. It's a simple tool for evaluating the risk and return of an investment, with shorter payback periods generally indicating lower risk. The payback period is the amount of time it takes to recover the initial investment in a project.

To calculate the payback period, we sum the cash flows until we reach or surpass the initial investment.

In this case, the initial investment is \$500, and the cash flows are: \$150, \$200, and \$300 in years 1, 2, and 3 respectively.

By adding the cash flows together, we find that the project's payback is 2 years and 25% of year 3, which is approximately 2.75 years.

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## Related Questions

Elsa joined her new law firm expecting to participate in exciting environmental law cases, and cutting edge research. After one month at the firm she still hasn't been assigned a case and spends most of her time filing standardized appeals for title disputes with insurance companies. In which stage of the socialization process is Elsa?

Full question:

Elsa joined her new law firm expecting to have a part in exciting environmental law cases, and cutting edge research. After one month at the firm she still hasn't been assigned a case and spends most of her time filing standardized appeals for title disputes with insurance companies. In which stage of the socialization process is Elsa?

A) prearrival

B) encounter

C) metamorphosis

D) ritual

E) systemic

encounter  stage of the socialization process is Elsa

Explanation:

Encounter Stage is the portion of the grades of socialization where a character enters or enrolls in an organization. Encounter is the secondary stage of socialization. People determine how to fit their expectations of equal entities inside the organization.

Because of the encounter stage, and how well a fresh employee fits, it circumscribes the potency, responsibility, and turnover of an employee. This is the type of transition, diversity, and wonder of the newcomer. This can generate a lot of stress for a fresh employee.

Sauder Corporation reports the following information: Net income \$380,000 Depreciation expense 70,000 Increase in accounts receivable 30,000 Sauder should report cash provided by operating activities of A. \$340,000. B. \$280,000. C. \$420,000. D. \$480,000.

Explanation: OCF ( operating cash flow) is usually calculated using the following formula: Operating Cash Flows = Net income + Noncash Expenses ( Depreciation Expense) + Changes in Working Capital.

Net income =\$380,000

Depreciation = \$70,000

Increase in accounts = \$30,000

OCF = \$380,000 + \$70,000 + \$30,000

= \$480,000

Cashflow statement gives the true state of affairs of a business with respect to cash and cash equivalent. Whereas a company may report good profit, it may be running an unhealthy business because of its poor management of cash resources. As a result, such a business may run into troubles.

Cash from operating Activities is a healthy way of evaluating the core operations of the business, to make good investment judgment around the profit reported.

Net Income = \$380,000

Add Depreciation (non- cash expense) = \$70,000

Deduct Increase in Accounts receivables (non-cash income) = \$30,000

Cash from operations = \$420,000.

What is the discount yield, bond equivalent yield, and effective annual return on a \$2 million commercial paper issue that currently sells at 98.25 percent of its face value and is 128 days from maturity? (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.161))

1. Discount yield = 4.92%

2. Dividend yield = 5.07%

3. Effective annual return = 5.02%

Explanation:

The computation of discount yield, bond equivalent yield, and effective annual return is shown below:-

Discount yield

Commercial paper                       \$2,000,000

Current selling price                    \$1,965,000

(\$2,000,000 × 98.25%)

Days to maturity                           128

Discount yield ( total days in a year)360

Dividend yield                                   4.92%

(\$2,000,000 - \$1,965,000) ÷ \$2,000,000 × (360 ÷ 128)

= \$35,000 ÷ \$2,000,000 × (2.8125)

= 0.0175 × 2.8125

= 0.04921

= 4.92%

Bond equivalent yield

Commercial paper                       \$2,000,000

Current selling price                    \$1,965,000

(\$2,000,000 × 98.25%)

Days to maturity                           128

Discount yield ( total days in a year)360

Bond equivalent yield                      5.07%

= (\$2,000,000 - \$1,965,000) ÷ \$1,965,000 × (365 ÷ 128)

= \$35,000 ÷ \$1,965,000 × 2.8515625

= 0.017811705  × 2.8515625

= 0.05079119

= 5.07%

3. Effective annual return

Bond equivalent yield               5.07%

Effective annual return              5.02%

= (1 + 5.07% ÷ 365)^365 -1

= 5.02%

USE THIS INFORMATION FOR THE NEXT THREE QUESTIONS. On Jan. 1st Sally buys a computer with her credit card for \$500. This transaction posts to her credit card account on Jan. 3rd. On Jan. 31st, Sally's monthly credit card cycle closes (with this being the only purchase) and she receives her bill in the mail on Feb. 5th. She is required to pay her bill by Feb. 25th. She mails her \$500 check on Feb. 23rd, it is received by the credit card company on Feb. 24th and the money is withdrawn from her account on Feb. 27th. What is Sally's "credit card float" on this transaction

Credit card float is the difference in time between the date of purchase and date when the payment is due.

Credit card Float = 54 days

Explanation:

The purchase date is the 1st January but the has only reflected on the credit card on the 3rd but date of purchase remains the 1st.

This is exactly like in depreciation 'available for use date' and 'date of use'

available for use is used to calculate depreciation, so we start on the purchase date.

on the date when payment is due

we have 25th of Feb and the 23rd of Feb the date of payment

we take 23rd the date of payment

just like in assets if  an asset has a useful life of 3 years and is sold in the two years the only depreciation or accumulated depreciation we reflect is for the years before it is sold.

Therefore the float period is between 1 jan and 23 feb = 54days

58 days

Explanation:

You are in the market for a new refrigerator for your company’s lounge, and you have narrowed the search down to two models. The energy-efficient model sells for \$1,700 and will save you \$45 in electricity costs at the end of each of the next five years. The standard model has features similar to the energy-efficient model but provides no future saving in electricity costs. It is priced at only \$1,500

It is better to buy an energy efficient model for \$ 1700.

Explanation:

It is better to buy an energy efficient model for \$ 1700 because at the end of five years its costs will be less than \$ 1500. It  saves \$ 45 each year and that would save \$ 45*5 = \$ 225 at the end of five years. That would result in low costs as \$ 1700- \$ 225= \$ 1475 which is less than \$ 1500.

Buying \$1500 is not a smart choice because then it would add up to expenses . Expenses for \$ 45 each year would result in \$225 in five years that would add up to be \$ 1725 which is higher than \$ 1700.

Woodman Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Estimated and actual data for direct labor and manufacturing overhead for last year are as follows: Estimated Actual
Direct Labor Hours: 600,000 550,000

Explanation:

Giving the following information:

Estimated Actual

Direct Labor Hours: 600,000 550,000

I assume that we need to calculate the over/under applied overhead.

First, we need to determine  the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= \$1.2 per direct labor hour

Now, we apply overhead based on actual hours:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 1.2*550,000

Allocated MOH= \$660,000