Final answer:
The payback period for a 5-year $280,000 investment with $60,000 annual inflows is 4.67 years. This calculation is based on dividing the initial amount of investment by the yearly inflow, without considering the time value of money.
Step-by-step explanation:
The payback period is the time it takes for an investment to generate an amount of income or cash inflows that is equal to the cost of the investment. To calculate the payback period for a 5-year $280,000 investment with annual cash inflows of $60,000, you simply divide the initial investment by the annual cash inflow. This calculation does not account for the time value of money but gives a simple estimation.
To calculate the payback period:
- Determine the initial investment amount. In this case, the investment is $280,000.
- Identify the annual cash inflow, which is reported to be $60,000 per year.
- Divide the initial investment by the annual cash inflow. This calculation would be $280,000 / $60,000 per year = 4.67 years.
Therefore, it would take approximately 4.67 years for the investment to pay back the initial $280,000, based on the $60,000 inflow a year.