Investment Project: Initial cost: $80,000 Cash inflows: Year 1: $12,000 Year 2: $15,000 Year 3: $20,000 Year
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Question:
Investment Project:
- Initial cost: $80,000
- Cash inflows:
- Year 1: $12,000
- Year 2: $15,000
- Year 3: $20,000
- Year 4: $25,000
- Year 5: $30,000
Year | Cash Flow | Cumulative Cash Flow |
0 | $(80,000) | $(80,000) |
1 | $12,000 | $(68,000) |
2 | $15,000 | $(53,000) |
3 | $20,000 | $(33,000) |
4 | $25,000 | $(8,000) |
5 | $30,000 | $22,000 |
Requirements:
- Determine the payback period.
- Calculate the cumulative cash flow by year 3.
- Identify the year when the investment breaks even.
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