Assignment Pay back period method Defined as the number of years required to recover the initial cash outlay invested in a project Pay back Period = Initial Investment /Annual Cash inflow Project with less pay back is selected
1. Initial investment = Rs 20,000 Cash inflow is Rs 5000 for 10 years Pay back period is….. 2. Initial cash outlay= Rs10,000, Generates cash inflow of Rs 2000, Rs 4000, Rs 3000, and Rs 2000. Pay back period? 3. A project costs Rs 1,00,000 and yields an annual cash inflow of Rs 20,000 for 7 years. Calculate pay back period 4. A project cost Rs 5,00,000 and yeilds annually a profit of Rs 80,000 after depreciation at 12% p.a but before tax of 50%. Calculate pay back period (Annual cash inflow = PAT+ depreciation) 5. There are two projects A and B. The cost of the projects is Rs 30,000 in each case. The cash inflows are as follows. Evaluate the project Year 1 2 3 Project A 10,000 10,000 10,000 Project B 2,000 4,000 24,000