Calculating payback
Claudine71
Registered, AAT Student Posts: 8
In task 1 do I take away the scrap value from the total I get at the end of year 5 or do I take it away from the initial investment and then work out the payback period?
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Best Answer

For payback, scrap value can be available or recovered as cash when you will scrap it, may be after 5 years, not at the time of investment. Hence, don't take away from initial investment to calculate payback period. Question is: How much time it will take to recover your initial cash outflow which is £450,000 for A and £100,000 for B, not £430,000 for A and £90,000 for B. I hope this clarifies.5