Question

Levi's Levees always evaluates projects using the payback method. What is the payback period for the following set of cash flows? (Round your answer to 2 decimal places, e.g., 32.16.) Year Cash Flow 0 –$ 4,900 1 1,150 2 1,350 3 2,230 4 1,250

Answer 1

3.14 years

Step-by-step explanation:

Year Cash flow Accumulated cash flows

0 -$4,900 -$4,900

1 $1,150 -$3,750

2 $1,350 -$2,400

3 $2,230 -$170

4 $1,250 $1,080

3 years + $170/$1,250 = 3.14

The payback period is 3.14 years, or 3 years, 1 month and 19 days.