Question

If the initial project investment is $50,000 and the average net cash flow is $10,000 per year into the foreseeable future, the payback period is __________.

a) 5 years
b) 4 years
c) 3 years
d) 2.5 years

Answer 1

The payback period for an initial investment of $50,000 with an average net cash flow of $10,000 per year is 5 years.

Step-by-step explanation:

The payback period is calculated by dividing the initial project investment by the average annual cash inflow from the project. In this case, if the initial investment is $50,000 and the average net cash flow is $10,000 per year, the payback period would be:

$50,000 ÷ $10,000/year = 5 years

Therefore, the payback period is 5 years (option a).