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Wittaler [7]
3 years ago
7

A project with an initial cost of $27,250 is expected to generate cash flows of $6,600, $8,700, $9,100, $8,000, and $7,400 over

each of the next five years, respectively. What is the project's payback period?
Business
1 answer:
earnstyle [38]3 years ago
8 0

Answer:

It will take 4 years and 130 days to recover for the initial investment.

Explanation:

Giving the following information:

A project with an initial cost of $27,250 is expected to generate cash flows of $6,600, $8,700, $9,100, $8,000, and $7,400

<u>The payback period is the time required to recover for the initial investment:</u>

<u></u>

Year 1= 6,600 - 27,250= -20,650

Year 2= 8,700 - 20,650= -11,950

Year 3= 9,100 - 11,950= -2,850

Year 4= 8,000 - 2,850= 5,150

<u>To be more accurate:</u>

(2,850/8,000)*365= 130

It will take 4 years and 130 days to recover for the initial investment.

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See below

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