Question

An investment project provides cash inflows of $705 per year for eight years. What is the project payback period if the initial cost is $1,900

Answer 1

2 years and 8 months

Step-by-step explanation:

The payback period is the length of time required for thee total cashflows to equal the Initial Capital Investment.

Payback = $1,900

Therefore,

$1,900 = $705 + $705 + $490

Which is 2 years and 8 months ($490/ $705 × 12)

Conclusion :

The project payback period is 2 years and 8 months