(QUESTION 4) The ABC Company is considering an investment (purchase equipment) with the following cash flows for this eq

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Question 4 The Abc Company Is Considering An Investment Purchase Equipment With The Following Cash Flows For This Eq 1 (163.56 KiB) Viewed 69 times

(QUESTION 4) The ABC Company is considering an investment (purchase equipment) with the following cash flows for this equipment that will have a useful life of 5 years. Investment (Today) $1,000,000 Year 1 cash inflow 100,000 Year 2 cash inflow 200,000 Year 3 cash inflow 200,000 Year 4 cash inflow 300,000 Year 5 cash inflow 500,000 Required Calculate the payback period and explain if the payback is reasonable given this situation. (QUESTION 5) The ABC Company has budgeted its credit sales as follows: June $600,000 July $600,000 August $800,000 September $1,200,000 October $1,400,000 November $1,600,000 Collections of credit sales are normally as follows: Collected within the same month of sale: 50% Collected in 30-60 days: 30% Collected in 60-90 days: 15% Uncollectible 5% The cash balance on 1st October is expected to be $100,000. Cash payments are expected to total $800,000 each month for July to November. Required: Calculate the net cash balance at the end of the October month. Suggest a strategy for the company, as they want to expedite the receipt of their money owed from credit sales, as the terms they provide are 30 days from the date of sale.