Company is considering a long-term investment project called ZIP ZIP will require an investment of $127,008

Accounting Jan 17, 2021

Company is considering a long-term investment project called ZIP ZIP will require an investment of $127,008. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,500, and annual cash te the cash payback period. (Round answer to 2 decimal places, e.g. 10.52.) Cash payback period years. LINK TO TEXT

Expert Solution

Solution: 3.24 years

Explanation: Cash Payback period: [Initial Investment / Annual net cash flow]

Here; Initial Investment = 127,008

Annual net cash flow = Cash inflow - Cash outflow = 80,500 - 41,300 = 39,200

Putting values in the formula:

Cash Payback period: [127,008 / 39200] = 3.24 years

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