Question

An investment project provides cash inflows of $590 per year for 11 years.

a. What is the project payback period if the initial cost is $1,770?

b. What is the project payback period if the initial cost is $4,366?

c. What is the project payback period if the initial cost is $7,080?

Answer 1

Answer of Part a:

Payback Period = Initial Cost / Annual Cash Flows
Payback Period = $1,770 / $590
Payback Period = 3 years

Answer of Part b:

Payback Period = Initial Cost / Annual Cash Flows
Payback Period = $4,366 / $590
Payback Period = 7.4 years

Answer of Part c:

Payback Period = Initial Cost / Annual Cash Flows
Payback Period = $7,080 / $590
Payback Period = 12 years