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A project with an initial cost of $24,800 is expected to generate cash flows of $5,900,...

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Finance

A project with an initial cost of $24,800 is expected togenerate cash flows of $5,900, $8,000, $8,750, $7,650, and $6,700over each of the next five years, respectively. What is theproject's payback period? Multiple Choice 3.28 years 3.39 years3.49 years 3.75 years 3.65 years

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4.2 Ratings (660 Votes)

3.28 years

Payback period is the time within which cost of project is recovered back.
Year Cash flow Cumulative Cash flow
0 $       -24,800 $ -24,800
1               5,900     -18,900
2               8,000     -10,900
3               8,750        -2,150
4               7,650         5,500
5               6,700       12,200
Payback period = 3+(2150/7650)
= 3.28 Years

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Transcribed Image Text

A project with an initial cost of $24,800 is expected togenerate cash flows of $5,900, $8,000, $8,750, $7,650, and $6,700over each of the next five years, respectively. What is theproject's payback period? Multiple Choice 3.28 years 3.39 years3.49 years 3.75 years 3.65 years

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