Question

3. Project Selection (Financial models) (3 pts.) (i) Even Cash Flows (1 pt.) A company plans invest $10 million in a project. The project leader expects $2.5 million per year for 8 years. Calculate payback period of the project.

Answer 1

4 years

Step-by-step explanation:

Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows

Payback period = Amount invested / cash flow

$10 million / $2.5 million = 4 years