Lester's Feed Mill is spending $230,000 to update its facility. The company estimates that this investment will improve its cash inflows by $46,500 a year for 10 years. What is the payback period?
A) 4.03 years
B) 4.95 years
C) 5.39 years
D) 5.67 years
E) The project never pays back.

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash inflow: $230,000 / $46,500 = 4.95 years.

Lester's Feed Mill Is Spending $230,000 to Update Its Facility