An investment project provides cash inflows of $675 per year for eight years. Wh

Question

An investment project provides cash inflows of $675 per year for eight years. What is the project payback period if the initial cost is $1,850? What if the initial cost is $3,600? What if it is $5,500?

What is the project payback period if the initial cost is $1,850? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

What is the project payback period if the initial cost is $3,600? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

What is the project payback period if the initial cost is $5,500? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

An investment project provides cash inflows of $675 per year for eight years. What is the project payback period if the initial cost is $1,850? What if the initial cost is $3,600? What if it is $5,500?

Explanation / Answer

Hi,

Please find the answer as follows:

Payback Period = Initial Investment/Annual Cash Inflows:

Part A:

Payback Period = 1850/675 = 2.74

Part B:

Payback Period = 3600/675 = 5.33

Part C:

Payback Period = 5500/675 = 0 (since project's payback period turns out to be 8.15 which is more than the expected life of the project).

Thanks.

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