Given the following cash flows for a proposed capital investment project, calculate the payback period. Year...

Given the following cash flows for a proposed capital investment project, calculate the payback period.

Year	Cash Flow
0	-$40,000
1	15,000
2	15,000
3	15,000
4	15,000
5	10,000
6	10,000

Question 4 options:

	5.50 years
	3.33 years
	4.33 years
	2.67 years

Expert Solution

Payback period= full years until recovery + unrecovered cost at the start of the year/cash flow during the year

= 2 years + ($40,000 - $30,000/ $15,000

= 2 years + $10,000/ $15,000

= 2 years + 0.67

= 2.67 years.

Hence, the answer is option d.

In case of any query, kindly comment on the solution

jeff jeffy answered 4 months ago

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