Payson manufacturing is considering an investment in a new automated manufacturing system. the new system requires an investment of $1,200,000 and either has: even cash flows of $200,000 per year or the following expected annual cash flows: $150,000, $150,000, $400,000, $400,000, and $100,000. required: calculate the payback period for each case. round your answer to one decimal place. a. years b. years

a. 6.0 years

b. 5.0 years

Explanation:

Payback period is the time required for the initial investment to be completely paid off, that is, cumulative cash flow = initial investment.

Investment = $1,200,000

a.) With even cash flows of $200,000, the payback time is:

b.) If cash flows have the following pattern:

Year 1: $150,000

Year 2: $150,000

Year 3: $400,000

Year 4: $400,000

Year 5: $100,000.

Payback period will at occur when the cumulative cash flow equals $1,200,000

answer makes less frequent trips to the bank and firms make less frequent price changes;

answer///supply is elastic, and demand is inelastic;