Answered

Get the most out of your questions with IDNLearn.com's extensive resources. Find the information you need quickly and easily with our reliable and thorough Q&A platform.

A project has an initial cost of $6,900. The cash inflows are $850, $2,400, $3,100, and $4,100 over the next four years, respectively. What is the payback period

Sagot :

Shahzaibfarazidn

Answer:

Thus, payback period is = 3 years and 1.61 months

Explanation:

Payback period is the time it will take the project cash flows to recover the initial investment. The payback period for the project in question will be,

Year       Cash flow      Remaining Amount

1               850               (6900 - 850) = 6050

2              2400             (6050 - 2400) = 3650

3              3100              (3650 - 3100) = 550

As the year 4 cash flow is 4100, we know that the amount will be recovered in year 4. However, we will calculate the exact period or months in year 4 that it will take to recover total initial investment assuming that cashflow occurs at constant rate through out the year.

Time = 550 / 4100 * 12 = 1.61 months

Thus, payback period is = 3 years and 1.61 months

We appreciate your contributions to this forum. Don't forget to check back for the latest answers. Keep asking, answering, and sharing useful information. IDNLearn.com is your reliable source for accurate answers. Thank you for visiting, and we hope to assist you again.