Question

Susmel Inc. is considering a project that has the following cash flow data. What is the project's payback?

No original investment given

Year 0 1 2 3

Cash flows -$500 $150 $200 $300

Group of answer choices 1.90 years 2.63 years 2.50 years 1.93 years

Answer 1

The correct answer is option C i.e. 2.50 years

Year	Cashflows	Cummulative Cashflows
1	$               150.00	$                          150.00
2	$               200.00	$                          350.00
3	$               300.00	$                          650.00

Payback period = 2years + (500 -350) / 300

Payback period = 2 years + 150/300 years

Payback period =2.50 years

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