Answer:
The correct answer for option (a) is 3.22 years, option (b) is 4.04 years and for option (c) is 0 years.
Explanation:
According to the scenario, the given data are as follows:
Cash inflow = $1,275
Project payback period = Initial cost ÷ Cash inflow
(a). Initial cost = $4,100
So, Project payback period = $4,100 ÷ $1,275
= 3.22 years
(b) Initial cost = $5,150
So, Project payback period = $5,150 ÷ $1,275
= 4.04 years
(c). Initial cost = $11,200
So, Project payback period = $11,200 ÷ $1,275
= 8.78 years
As it is more than the eight years period, it never pays back.
So, 0 years
