Homework 25 Solution
8.46
If NPS purchases the trucks, their initial investment is $30,000 and their net revenues are $3500 per
month. If their nominal MARR is 9% per year (0.75% per month) then their payback period with
interest can be calculated as follows:
$30,000
$3500 P  A,0.75%,n
0
$30,000
P  A,0.75%,n
8.5714
$3500
Looking through the 0.75% table at the back of the book, we find that (PA,0.75%,9) > 8.5714, so the
payback period is 9 months.
If NPS leases the trucks, their investment is $10,000 at the beginning of each year and their net revenues
are $2000 per month. Assuming their payback period is less than one year, it can be found as follows:
$10,000
$2000 P  A,0.75%,n
0
$10,000
P  A,0.75%,n
5.0000
$2000
Looking through the 0.75% table at the back of the book, we find that (PA,0.75%,6) > 5.0000, so the
payback period is 6 months.
8.47
To calculate the noreturn payback period, we simply sum the cash flows until they become positive:
Month 0: –$15,000
Month 1: –$15,000 – $2000 = –$17,000
Month 2: –$17,000 – $2000 = –$19,000
Month 3: –$19,000 + $1000 = –$18,000
Month 4: –$18,000 + $1000 = –$17,000
Month 5: –$17,000 + $6000 = –$11,000
Month 6: –$11,000 + $6000 = –$
5,000
Month 7: –$
5,000 + $6000 = +$
1,000
So it takes nearly 7 months to recoup his initial investment.
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 Fall '08
 Moore,L
 Net Present Value, PAYBACK PERIOD, NPS

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