Final answer:
The cash payback period of the project is 3 years.
Step-by-step explanation:
The cash payback period of a project is the length of time it takes for the project's cash inflows to recoup the initial investment. To calculate the cash payback period, you need to determine how long it will take for the cumulative cash inflows to equal or exceed the initial investment.
In this case, the project requires a $14,000 investment and is expected to produce cash flows of $6,000 in year 1, $6,000 in year 2, and $4,000 in year 3.
First, calculate the cumulative cash inflows by adding up the cash flows for each year:
Year 1: $6,000
Year 2: $6,000 + $6,000 = $12,000
Year 3: $12,000 + $4,000 = $16,000
Next, determine the cash payback period by finding the year in which the cumulative cash inflows equal or exceed the initial investment:
Year 1: $6,000 < $14,000
Year 2: $12,000 < $14,000
Year 3: $16,000 > $14,000
Therefore, the cash payback period of the project is 3 years, as it takes 3 years for the cumulative cash inflows to equal or exceed the $14,000 initial investment.