Capri Industries is considering an investment that has an initial cost of $26,500 and the following expected cash inflows: Year Cash Inflow 1 $6,000 2 $8,000 3 $10,000 4 $5,000 5 $3,000 The expected payback period is

It will take 3.5 years to cover the initial investment.

Explanation:

Giving the following information:

Initial investment= $26,500

Cash flows:

1 6,000

2 8,000

3 10,000

4 5,000

5 3,000

The payback period is the time required to cover the initial investment:

Year 1= 6,000 - 26,500= -20,500

Year 2= 8,000 - 20,500= -12,500

Year 3= 10,000 - 12,500= -2,500

Year 4= 5,000 - 2,500= 2,500

To be more accurate:

(2,500/5,000)= 0.5

It will take 3.5 years to cover the initial investment.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: