Problem 1) Payback Method
The company paid $50,000 cash for a capital investment. The company expects the investment to generate net cash inflows of $8,400 per year. What is the payback period of this investment?
Problem 2) Uncertain Expected Cash Flows
The company is considering an investment that costs $785,000 today and has a salvage value in 10 years of $137,714, but the company is not sure how much net annual cash inflow will be provided by the investment. The company has a discount rate of 7%. Compare the net amount of annual cash inflow required to break even.