Question

g A project has an initial cost of $6,900. The cash inflows are $850, $2,400, $3,100, and $4,100 over the next four years, respectively. What is the payback period? D) 3.51 years A) 3.73 years E) 3.94 years B) 2.51 years C) 3.13 years

Answer 1

Answer:

It will take 3.13 years to recover the initial investment.

Explanation:

Giving the following information:

A project has an initial cost of $6,900. The cash inflows are $850, $2,400, $3,100, and $4,100 over the next four years.

The payback is the time required to cover for the initial investment.

Year 1= 850 - 6,900= - 6,050

Year 2= 2,400 - 6,050= - 3,650

Year 3= 3,100 - 3,650= - 550

Year 4= 4,100 - 550= 3,550

To be more accurate:

(550/4,100)= 0.13

It will take 3.13 years to recover the initial investment.