A firm is evaluating a proposal which has an initial investment of $35,000 and has cash flows of$10,000 in year 1, $20,000 in year 2, and $10,000 in year 3. The payback period of the project is
A) between 2 and 3 years.
B) 1 year.
C) between 1 and 2 years.
D) 2 years.

Question

Quizplus · Accepted Answer

The cumulative cash flow after year 1 is $10,000, and after year 2 is $30,000. The initial investment is $35,000, so the payback period is between 2 and 3 years.

A Firm Is Evaluating a Proposal Which Has an Initial