QUESTION 5

Payback Method

The management of Deitrich Inc., a civil engineering design company, is considering an investment in a high-quality blueprint printer with the following cash flows:

Year Investment Cash Inflow

1 $28,000 $2,000

2 $4,000 $3,000

3 $6,000

4 $8,000

5 $9,000

6 $8,000

7 $6,000

8 $5,000

9 $4,000

10 $4,000

Required:

1. Determine the payback period of the investment.
2. Would the payback period be affected if the cash inflow in the last year was several times larger?