A project with an initial cost of $24,800 is expected to generate cash flows of $5,900,...

A project with an initial cost of $24,800 is expected to generate cash flows of $5,900, $8,000, $8,750, $7,650, and $6,700 over each of the next five years, respectively. What is the project's payback period? Multiple Choice 3.28 years 3.39 years 3.49 years 3.75 years 3.65 years

Expert Solution

3.28 years

Payback period is the time within which cost of project is recovered back.

Year	Cash flow	Cumulative Cash flow
0	$ -24,800	$ -24,800
1	5,900	-18,900
2	8,000	-10,900
3	8,750	-2,150
4	7,650	5,500
5	6,700	12,200

Payback period		=	3+(2150/7650)
		=	3.28 Years

jeff jeffy answered 1 year ago

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