The payback period of a project that costs $1,000 initially and promises after-tax cash inflows of $300 for the next three years is 3.33 years.

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash inflows. In this case, the payback period would be:

$1,000 initial investment / $300 annual cash inflows = 3.33 years

Therefore, the statement is true.

The Payback Period of a Project That Costs $1,000 Initially