Question

An investment project provides cash inflows of $645 per year for eight years.

Required:
a. What is the project payback period if the initial cost is $1,550?
b. What if the initial cost is $3,500? What if it is $5,300?
c. What is the project payback period if the initial cost is $1,800?
d. What is the project payback period if the initial cost is $3,500?
e. What is the project payback period if the initial cost is $5,300?

Answer 1

Step-by-step explanation:

The length of time required to recover the cost of an investment. The payback period of a given investment or project is an important determinant of whether to undertake the position or project, as longer payback periods are typically not desirable for investment positions.

Calculated as:

Payback Period = Cost of Project / Annual Cash Inflows

project payback period if the initial cost is $1,800,

payback period = 2.79 years

project payback period if the initial cost is $3,500,

payback period = 5.43 years

project payback period if the initial cost is $5,300,

payback period = 0 years(never pays back)