J&J Manufacturing is considering a project with the following cash flows. Calculate the payback period of the project. $\begin{array}{ll}
\text { Year } & \text { CF } \
0 & (100,000) \
1 & 40,000 \
2 & 50,000 \
3 & 50,000
\end{array}$

Question

Quizplus · Accepted Answer

The payback period is the time it takes for the cumulative cash flows to equal the initial investment. By the end of Year 2, the cumulative cash flow is $90,000 ($40,000 + $50,000). In Year 3, an additional $10,000 is needed to reach the $100,000 initial investment, which takes 0.2 years ($10,000/$50,000). Thus, the payback period is 2.2 years.

J&J Manufacturing Is Considering a Project with the Following Cash Year CF 0(100,000)140,000250,000350,000\begin{array}{ll}\text { Year } & \text { CF } \\0 & (100,000) \\1 & 40,000 \\2 & 50,000 \\3 & 50,000\end{array} Year 0123​ CF (100,000)40,00050,00050,000​

J&J Manufacturing Is Considering a Project with the Following Cash $\begin{array}{ll}\text { Year } & \text { CF } \\0 & (100,000) \\1 & 40,000 \\2 & 50,000 \\3 & 50,000\end{array}$