Question

A project has an initial cost of $44,000. Expected cash flows as a result of this project are projected as follows. Calculate the payback period for this project. Assume a discount rate of 9%.

Answer 1

3.5 year

Step-by-step explanation:

The computation of the payback period is given below:

Year Cash Inflow Cumulative Cash Inflow

1 $10,000 $10,000

2 $10,000 $20,000

3 $15,000 $35,000

4 $18,000 $53,000

Now the payback period is

= 3 year + ($53,000 - $44,000) ÷ $18,000

= 3 year + 0.5

= 3.5 year