A florist is buying a number of motorcycles to expand its delivery service.These will cost $87,000,but are expected to increase profits by $3000 per month over the next four years.What is the payback period in this case?
A)12 months
B)18 months
C)24 months
D)29 months
E)36 months

Question

Quizplus · Accepted Answer

To calculate the payback period, we need to divide the initial cost of the motorcycles by the monthly cash flow generated by them. 
Initial cost = $87,000 
Monthly cash flow = $3,000

Payback period = Initial cost / Monthly cash flow

Payback period = $87,000 / $3,000

Payback period = 29

Therefore, the payback period in this case is 29 months, which is option D.

A Florist Is Buying a Number of Motorcycles to Expand