Answer:
1.875 years
Explanation:
Payback period is a capital appraisal technique that allows to identify the time it takes to recover initial outlay of a project.
The Payback period for this period can be computed as,
Initial outlay = $1,500,000
First Subtract the first year cash flow to find residual out lay,
Year 0 = (1,500,000)
Year 1 = 800,000 Residual Outlay = (1500,000-800,000) = $700,000
Since year 2 cash flows are more than residual outlay, the payback period is,
Payback Period = 1 + (700,000/800,000) = 1.875 years
here "1" refers to year 1.
Hope that helps.
