Michael Smith recently invested in a project that has an expected annual cash inflow of $7,000 for 10 years,and an expected payback period of 3.6 years.How much did Michael invest in the project?

Question

Quizplus · Accepted Answer

To calculate the amount Michael invested, we need to use the formula for payback period:

Payback period = Investment Required / Annual Cash Inflow

We are given that the expected payback period is 3.6 years, and the annual cash inflow is $7,000.

3.6 = Investment Required / 7,000

Multiplying both sides by 7,000:

25,200 = Investment Required

Therefore, Michael invested $25,200 in the project. The correct answer is C.

Michael Smith Recently Invested in a Project That Has an Expected