It will cost $2,600 to acquire a small ice cream cart.Cart sales are expected to be $1,400 a year for three years.After the three years, the cart is expected to be worthless as that is the expected remaining life of the cooling system.What is the payback period of the ice cream cart?
A).86 years
B)1.46 years
C)1.86 years
D)2.46 years
E)2.86 years

Question

Quizplus · Accepted Answer

To find the payback period, we need to divide the initial cost ($2,600) by the annual cash flows ($1,400).
Payback period = $2,600 ÷ $1,400 per year = 1.86 years
Therefore, the best choice is C.

It Will Cost $2,600 to Acquire a Small Ice Cream