Answer:
6.92 years
Explanation:
The payback period measures how long it takes for the amount invested in a project to be recovered.
The total cost of the project is $388,000.
Because the project generates no cash flow in the first and second year , the amount recovered would be 0.
In the third year, the amount recovered of $388,000 is $69,000. This reduces the cost of the project to $319,000.
In the fourth year , the amount recovered is $88,000. This reduces the cost of the project to $231,000.
In the fifth year, the amount recovered is $102,000. This reduces the cost of the project to $129,000.
In the sixth year, the amount recovered is $140,000. This covers the cost of the project and generates a profit of $11,000.
The amount is recovered in the 6th year + 129000/ 140,000 = 6.92 years
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