Answer:
In 5.99 years, the invested amount is recovered.
Explanation:
In the payback, we analyze in how many years the invested amount is recovered. The computation is shown below:
In year 0 = $419,000
In year 1 = $0
In year 2 = $0
In year 3 = $69,000
In year 4 = $98,000
In year 5 = $109,000
In year 6 = $145,000
In year 7 = $165,000
If we sum the first 5 year cash inflows than it would be $276,000
Now we deduct the $276,000 from the $419,000 , so the amount would be $143,000 as if we added the fourth year cash inflow so the total amount exceed to the initial investment. So, we deduct it
And, the next year cash inflow is $145,000
So, the payback period equal to
= 5 years + $143,000 ÷ $145,000
= 5.99 years
In 5.99 years, the invested amount is recovered.
