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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...

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Finance

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

YearCash Flow
0-$40,000
115,000
215,000
315,000
415,000
510,000
610,000

Question 4 options:

5.50 years

3.33 years

4.33 years

2.67 years

Answer & Explanation Solved by verified expert
4.0 Ratings (430 Votes)

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
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Transcribed Image Text

Given the following cash flows for a proposed capital investmentproject, calculate the payback period.YearCash Flow0-$40,000115,000215,000315,000415,000510,000610,000Question 4 options:5.50 years3.33 years4.33 years2.67 years

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