Ducky Pizza Restaurant purchases a van to deliver pizzas to their customers. The van costs £28,000 and is projected to increase revenues by £10,000 a year and to increase costs by £4,500. The payback period for this van is

Question

Quizplus · Accepted Answer

To calculate the payback period, we need to calculate the amount of time it takes for the increased revenues to cover the cost of the van.

Payback period = Cost of investment / Annual cash inflow

Cost of investment = £28,000
Annual cash inflow = Increased revenues - Increased costs = £10,000 - £4,500 = £5,500

Payback period = £28,000 / £5,500 = 5.1 years

Therefore, the best choice is C, as it has the lowest payback period among the given options.

Ducky Pizza Restaurant Purchases a Van to Deliver Pizzas to Their