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Payback Period Year Beginning Unrecovered Investment Cash Inflow
Payback Period Year Beginning Unrecovered Investment Cash Inflow
Payback Period Year Beginning Unrecovered Investment Cash Inflow
1)
Payback Period
Year Beginning Unrecovered Investment Cash Inflow
0 $500,000,000 0
1 $500,000,000 $60,000,000
2 $440,000,000 $90,000,000
3 $350,000,000 $170,000,000
4 $180,000,000 $230,000,000
Since only $180,000,000 need to be recovered in year 4 while the cash flow is
$205,000,000, then the amount would be recovered in a fraction of year 4. To calculate
this fraction: $180,000,000 / $205,000,000 = 0.88.
2)
Yes, the company should open the mine since it has a positive NPV
3)
Ending Unrecovered Investment
$500,000,000
$440,000,000
$350,000,000
$180,000,000
($50,000,000)