Answer:
It will take 2.6 years to cover the initial investment.
Explanation:
Giving the following information:
Initial investment= $56,000
Cash flows:
Cf1= $21,500
Cf2= 23,100
Cf3= $19,000
<u>The payback period is the time required to cover the initial investment.</u>
Year 1= 21,500 - 56,000= -34,500
Year 2= 23,100 - 34,500= -11,400
Year 3= 19,000 - 11,400= $7,600
<u>To be more accurate:</u>
(11,400/19,000)= 0.6
It will take 2.6 years to cover the initial investment.