What is the payback period for a project with the following cash flows? $$\begin{array} { | c | r | }
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & - \$ 75,000 \
\hline 1 & 15,000 \
\hline 2 & 23,000 \
\hline 3 & 35,000 \
\hline 4 & 25,000 \
\hline
\end{array}$$
A)2.56 years
B)2.89 years
C)3.08 years
D)3.24 years
E)Never

Question

What is the payback period for a project with the following cash flows? $$\begin{array} { | c | r | } 
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & - \$ 75,000 \
\hline 1 & 15,000 \
\hline 2 & 23,000 \
\hline 3 & 35,000 \
\hline 4 & 25,000 \
\hline
\end{array}$$
A)2.56 years
B)2.89 years
C)3.08 years
D)3.24 years
E)Never

Quizplus · Accepted Answer

The cumulative cash flow becomes positive between years 2 and 3. By the end of year 2, the cumulative cash flow is -$37,000. In year 3, $35,000 is received. The payback period is 2 + (37,000/35,000) = 3.08 years.

What Is the Payback Period for a Project with the Following