Question

Calculate the payback period for the following investment: Invest ($10,000). Cash flows in Yr1: 1,000; Yr2: 3,000; Yr3: 3,000; Yr4: 3,000; Yr5: 100,000; Yr6: 250,000. Group of answer choices 6 years 4 years 5 years 3 years

Answer 1

Answer:

4 years

Explanation:

The computation of the payback period is shown below:

In the payback, we analyze in how many years the invested amount is recovered

In year 0 = -$10,000

In year 1 = $1,000

In year 2 = $3,000

In year 3 = $3,000

In year 4 = $3,000

In year 5 = $100,000

In year 6 = $250,000

If we sum the first 4 year cash inflows than it would be $10,000

And, the initial investment is also $10,000

So, in 4 years, the investment amount is recovered