Answer:
6 years
Explanation:
The Payback period calculates how much it takes the amount invested in a project to be recovered from the cumulative cash flow.
Total amount invested = $500,000 + $100,000 = $-600,000
Cash inflow in year 2 = $100,000
Amount recovered in year 2 = $-600,000 + 100,000 = $-500,000
Cash inflow in year 3 = $100,000 × 1.1 = 110,000
Amount recovered in year 3=$-500,000 + 110,000 = $-390,000
Cash inflow in year 4= $121,000
Amount recovered in year 4 = $-390,000 + $121,000 = $-269,000
Cash inflow in year 5= $133,100
Amount recovered in year 5 = $-269,000 + $133,100 = $-135,900
Cash inflow in year 6 = $146,410
Amount recovered in year 6 = $146,410 $-135,900 = $10,510
The amount is recovered In 5.93 years
I hope my answer helps you
