Question

Inexacta Enterprises wants to compute the payback on a $100,000 capital investment that is projected to produce $23,850 in after-tax cash inflow each year for the next five years and has a 7% salvage value at end of the fifth year.1. 3.90 2. 4.19 3. 4.49 4. 5.39

Answer 1

4.19

Step-by-step explanation:

The payback period measures how long it takes for the amount invested in a project to be recovered from the cummulative after tax cash flows.

Payback period = amount invested/ after tax cash flows

$100,000 / $23,850 = 4.19 years

I hope my answer helps you.