Use the following to answer question:
Table 14.5
Year
Costs
Benefits
0
$1,200
$ 0
1
400
2
400
3
200
4
200
5
200
-(Table 14.5) What is the payback period of the investment?

Question

Quizplus · Accepted Answer

To calculate the payback period, we add up the costs until they are equal to or less than the total benefits. In this case:
- Year 1: Costs = $1,200 - $400 = $800, Benefits = $0 + $0 = $0
- Year 2: Costs = $800 - $400 = $400, Benefits = $0 + $0 = $0
- Year 3: Costs = $400 - $200 = $200, Benefits = $0 + $0 = $0
- Year 4: Costs = $200 - $200 = $0, Benefits = $0 + $0 = $0

Therefore, the payback period is four years.

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