Question

A project has an initial cost of $2,400. The cash inflows are $0, $1,600, $1,100, and $700 over the next four years, respectively. What is the payback period?

Answer 1

It will take 2.73 years to cover the initial investment.

Step-by-step explanation:

The payback period is the time required to cover the initial investment:

Year 1= 0 - 2,400= -2,400

Year 2= 1,600 - 2,400= -800

Year 3= 1,100 - 800= $300

To be more accurate:

(800/1,100)= 0.73

It will take 2.73 years to cover the initial investment.