The payback period of a project that costs $1,000 initially and promises after-tax cash inflows of $3,000 each year for the next three years is 3.33 years.

Question

Quizplus · Accepted Answer

The payback period is the time it takes for the initial investment to be recovered through cash inflows. In this case, the initial investment of $1,000 is recovered in less than one year since the first year's cash inflow is $3,000, which exceeds the initial cost.

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