Alchemax Inc. is looking to undertake a project that requires an initial fixed investment of $200,000 and is expected to return a net cash inflow of $50,000 each year. The payback period for this project will be _____ years.
A) 2
B) 7
C) 4
D) 9
E) 5

Question

Quizplus · Accepted Answer

The payback period is the number of years it takes to recover the initial investment. In this case, the initial investment is $200,000 and the annual net cash inflow is $50,000. Therefore, the payback period will be 200,000 / 50,000 = 4 years.