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An investment project provides cash inflows of $645 per year for eight years. a.)What is the...

An investment project provides cash inflows of $645 per year for eight years.

a.)What is the project payback period if the initial cost is $1,800?

b.) What is the project payback period if the initial cost is $3,500?

c.) What is the project payback period if the initial cost is $5,300?

Solutions

Expert Solution

Payback period - Payback period of an investment is the time required for cumulative net cash inflows from an investment equal to cash out flows'

Accordingly , We can calculate the pay back period using the below table.

a) Intial investment is 1800

Formula = Total Initial Investment / Cash in flows per year

= 1800/645

= 2.790698

b) Initial Investment is 3500

Formula = Total Initial Investment / Cash in flows per year

= 3500/645

= 5.426357

C)

Initial Investment is 5300

Formula = Total Initial Investment / Cash in flows per year

5300/645 = 8.217054

It is to be noted that here we are unable to recover our investment with the cash flows given .

As the pay back period is more than 8 years

jeff jeffy answered 2 years ago
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