Folsom Advertising, Inc. is considering an investment in a new information system. The new system requires an

Question:

Folsom Advertising, Inc. is considering an investment in a new information system. The new system requires an investment of $1,800,000 and either has

(a) Even cash flows of $750,000 per year or

(b) The following expected annual cash flows: $450,000, $225,000, $600,000, $600,000, and $150,000.

Required:

Calculate the payback period for each case.

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...