Answer:
It will take 3.5 years to cover the initial investment.
Explanation:
Giving the following information:
Initial investment= $26,500
Cash flows:
1 6,000
2 8,000
3 10,000
4 5,000
5 3,000
<u>The payback period is the time required to cover the initial investment:</u>
Year 1= 6,000 - 26,500= -20,500
Year 2= 8,000 - 20,500= -12,500
Year 3= 10,000 - 12,500= -2,500
Year 4= 5,000 - 2,500= 2,500
<u>To be more accurate:</u>
<u></u>
(2,500/5,000)= 0.5
It will take 3.5 years to cover the initial investment.