It will cost $9,600 to acquire an ice cream cart that is expected to produce cash inflows of $3,600 a year for three years. After the three years, the cart is expected to be worthless. What is the payback period?
A) 1.82 years
B) 2.67 years
C) 2.82 years
D) 1.67 years
E) 1.79 years

Question

Quizplus · Accepted Answer

The payback period is the time it takes for the cash inflows to cover the initial investment. Here, $9,600 / $3,600 per year = 2.67 years.

It Will Cost $9,600 to Acquire an Ice Cream Cart