Question

A project that costs $25,000 today will generate cash flows of $8,600 per year for seven years. What is the project's payback period?

Answer 1

Answer: 2.90 years.

Explanation:

Payback period is the amount of time that it will take a project to pay back or recuperate the initial investment in the project.

This project is making $8,600 a year and had an initial investment of $25,000.

The Payback period is;

= Investment / Annual Cashflow

= 25,000 / 8,600

= 2.90 years.