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The Golden Goose is considering a project with an initial cost of $46,700. The project will...

The Golden Goose is considering a project with an initial cost of $46,700. The project will produce cash inflows of $10,000 a year for the first two years and $12,000 a year for the following three years. What is the payback period?

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Expert Solution

Year Cash Flow Accumulated Cash Flow
0 $   -46,700 $                               -46,700
1 $    10,000 $                               -36,700
2 $    10,000 $                               -26,700
3 $    12,000 $                               -14,700
4 $    12,000 $                                 -2,700
5 $    12,000 $                                   9,300
Payback period = 4 years + 2700/12000
=4.23 years

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