Question

roject A costs $6,000 and will generate annual after-tax net cash inflows of $2,150 for five years. What is the payback period for this investment under the assumption that the cash inflows occur evenly throughout the year

Answer 1

Answer:

It will take 2.79 years to cover the initial investment.

Explanation:

Giving the following information:

Project A costs $6,000 and will generate annual after-tax net cash inflows of $2,150 for five years.

The payback period is the time required to cover the initial investment:

Year 1= 2,150 - 6,000= -3,850

Year 2= 2,150 - 3,850= -1,700

Year 3= 2,150 - 1,700= 450

To be more accurate:

(1700/2150)= 0.79

It will take 2.79 years to cover the initial investment.