Answer:
6.34 years
Explanation:
Year Cash outflow Cash inflow Net cash flow Cumulative cash flow
1 ($1,900,000) $95,000 ($1,805,000) ($1,805,000)
2 ($550,000) $205,000 ($345,000) ($2,150,000)
3 $360,000 $360,000 ($1,790,000)
4 $485,000 $485,000 ($1,305,000)
5 $510,000 $510,000 ($795,000)
<u>6 $595,000 $595,000 ($200,000)</u>
7 $595,000 $595,000 $395,000
8 $305,000 $305,000 $700,000
9 $255,000 $255,000 $955,000
10 $250,000 $250,000 $1,205,000
Payback period = 6 + 200,000/ 595,000
Payback period = 6 + 0.3361345
Payback period = 6.336134
Payback period = 6.34 years
So, the payback period of this uneven cash flow is 6.34 years.
