Figure 14-5.Sara Turner is considering investing $60,000 in a project with the following cash revenues and expenses:

-Refer to Figure 14-5. Assuming straight-line depreciation over five years, what is the payback period for this investment?

Question

Figure 14-5.Sara Turner is considering investing $60,000 in a project with the following cash revenues and expenses:
 
-Refer to Figure 14-5. Assuming straight-line depreciation over five years, what is the payback period for this investment?

Quizplus · Accepted Answer

The payback period is the time it takes for an investment to generate an amount of money equal to the initial cost of the investment. With straight-line depreciation, the cost is evenly spread over the five years. Without seeing Figure 14-5, we can deduce that if an investment is depreciated over five years, the payback period would logically be within that timeframe, assuming the investment generates consistent returns. The correct choice, "between 3 and 4 years," suggests that the investment starts generating enough cumulative returns to cover its initial cost within that period, which is a reasonable timeframe for many investments before reaching full depreciation.