Question

An investment project provides cash inflows of $1,175 per year for eight years. a. What is the project payback period if the initial cost is $3,900? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the project payback period if the initial cost is $4,950? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the project payback period if the initial cost is $10,400?

Answer 1

A. 3.32 years

B. 4.21 years

C. No payback period

Step-by-step explanation:

The payback period calculates the amount of time it takes the cumulative cash flows to equal the amount invested .

The attached tables, calculates how the pay back periods are calculated.

For the project with an investment of $3900, the payback period = 3 years + 375 / 1175 Years = 3.32 years

For the project with an investment of $4950, the payback period = 4 years +250 / 1175 Years = 4.21 years

For the project with an investment of $10,400, there is no payback.