An initial investment of $42,000 is expected to generate annual cash flows of $10,000, $15,000, $15,000, and $12,000, respectively. Assume straight- line depreciation and ignore income taxes. The payback period is:

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Quizplus · Accepted Answer

The payback period is calculated by adding the cash flows until the initial investment is recovered. After 3 years, $40,000 is recovered, and in the fourth year, $2,000 is needed, which takes 2/12 of a year, resulting in a payback period of 3.17 years.

An Initial Investment of $42,000 Is Expected to Generate Annual