Eagle Company is considering the purchase of an asset for $100,000.It is expected to produce the following net cash flows.The cash flows occur evenly throughout each year.Compute the payback period for this investment.(Round to two decimal places.) $$\begin{array} { | l | r | l | }
\hline & \begin{array} { l }
\text { Annual Net } \
\text { Cash Flows }
\end{array} \
\hline \text { Year 1 } & \$ 40,000 & \
\hline \text { Year 2 } & \$ 40,000 & \
\hline \text { Year 3 } & \$ 35,000 & \
\hline \text { Year 4 } & \$ 35,000 & \
\hline \text { Year 5 } & \$ 30,000 & \
\hline
\end{array}$$

Question

Eagle Company is considering the purchase of an asset for $100,000.It is expected to produce the following net cash flows.The cash flows occur evenly throughout each year.Compute the payback period for this investment.(Round to two decimal places.) $$\begin{array} { | l | r | l | } 
\hline & \begin{array} { l } 
\text { Annual Net } \
\text { Cash Flows }
\end{array} \
\hline \text { Year 1 } & \$ 40,000 & \
\hline \text { Year 2 } & \$ 40,000 & \
\hline \text { Year 3 } & \$ 35,000 & \
\hline \text { Year 4 } & \$ 35,000 & \
\hline \text { Year 5 } & \$ 30,000 & \
\hline
\end{array}$$

Quizplus · Accepted Answer

The cumulative cash flow reaches $100,000 between Year 2 and Year 3. By the end of Year 2, $80,000 is recovered. The remaining $20,000 is recovered in Year 3. The payback period is 2 + ($20,000/$35,000) = 2.57 years.

Eagle Company Is Considering the Purchase of an Asset for $100,000.It