Question

What is the payback period for an investment project with an upfront cost of $1,000,000, but benefits of $400,000 per year forever? (Note: Enter the number of years as your answer, but do not enter "years", just the number.)

Answer 1

2.5

Step-by-step explanation:

Upfront cost = $1,000,000

Yearly benefits = $400,000

The payback period is the time that a business takes to repay the amount investment. That is, the time it takes to break even.

In this case, since benefits are steady and no further incurred costs are mentioned. The payback period (t) is given by:

`t=(\$1,000,000)/(\$400,000) \\t=2.5\ years`