Garner Inc.is considering a project that has the following cash flow data.What is the project's payback?
A)1.42 years
B)1.58 years
C)1.75 years
D)1.93 years
E)2.12 years

Question

Garner Inc.is considering a project that has the following cash flow data.What is the project's payback? 
A)1.42 years 
B)1.58 years 
C)1.75 years 
D)1.93 years 
E)2.12 years

Quizplus · Accepted Answer

To find the payback period, we add up the cash inflows until we reach the initial investment of $60,000. Based on the table, this occurs at the end of Year 2, after the $40,000 cash inflow. Therefore, the payback period is 2 years - (($60,000 - $32,000)/$40,000) = 1.75 years. The best choice is C, as it is the correct answer.