A firm is evaluating a proposal which has an initial investment of $50,000 and has cash flows of $15,000 per year for five years. The payback of the project is:
A) 1.5 years
B) 2 years
C) 3.3 years
D) 4 years
E) none of the above

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash flow. So, $50,000 / $15,000 = 3.33 years, which rounds to 3.3 years.

A Firm Is Evaluating a Proposal Which Has an Initial