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Dimas [21]
3 years ago
8

Susmel Inc. is considering a project that has the following cash flow data. What is the project's payback? Year 0 1 2 3 Cash flo

ws -$475 $150 $200 $300 a. 2.88 years b. 2.85 years c. 2.42 years d. 1.96 years e. 2.47 years
Business
1 answer:
Rashid [163]3 years ago
8 0

Answer:

c. 2.42 years

Explanation:

The computation of the payback period is shown below:

<u>Year        Cash flow         Cumulative cash flow</u>

0               -$475                     -$475

1                  $150                     -$325

2                 $200                    -$125

3                  $300                    $175

Now the payback period is

= 2 years + $125 ÷ $300

= 2.42 years

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