Question

Compute the payback period for a project that requires an initial outlay of $297,771 that is expected to generate $40,000 per year for 9 years.

Answer 1

7.44

Step-by-step explanation:

The computation of the payback period is given below:

Time Amount Cumulative

0 (297,771) (297,771)

1 40,000 (257,771)

2 40,000 (217,771)

3 40,000 (177,771)

4 40,000 (137,771)

5 40,000 (97,771)

6 40,000 (57,771)

7 40,000 (17,771)

8 40,000 22,229

9 40,000 62,229

Now the payback period is

=7 + (17,771 ÷ 40,000)

= 7.44