Question

Payb- Based on the information below, calculate the payback period. (4 points) Show and label your work. Investment $700,000 Required rate of return 12% Depreciation method Straight Line Useful life 5 years Residual value $20,000 Estimated net cash inflows per year for five years $150,000 2. Based on your answer in part 1, would you accept or reject this project? Why?

Answer 1

4.7 years

The project would be accepted because the amount invested in the project would be recovered within the useful life

Step-by-step explanation:

Payback period is the time it takes to recover the amount invested in a project from its cumulative cash flows

Payback period = amount invested / cash flows

$700,000 / $150,000 = 4.7 years

The project would be accepted because the amount invested in the project would be recovered within the useful life