Answer:
payback period = 4.86 years
Explanation:
given data
cash flows year 1 = $30,000 per year
cash flows year 5 = $35,000 per year
cash flows year 10 = $40,000 per year
investment cost = $150,000
to find out
payback period for this investment
solution
we get here accumulated inflows will be
accumulated inflows year 4 = $30,000 × 4
accumulated inflows year 4 = $120,000
and
accumulated inflows year 5 = $120,000 + $35,000 = $155,000
and Initial investment = $150,000
so payback period will be
payback period = 4 years + (150,000 - 120,000) ÷ 35,000 × 365 days
payback period = 4 years and 313 days
payback period = 4.86 years
