Your project has expected cash inflows of $1.2 million in year 1, $2.4 million in year 2, and $4.6 million in year 3. The project pays for itself in 23 months. Which cash flow technique was used to determine this?

Question

Business

Ali

9 February, 14:06

Your project has expected cash inflows of $1.2 million in year 1, $2.4 million in year 2, and $4.6 million in year 3. The project pays for itself in 23 months. Which cash flow technique was used to determine this?

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Answers (1)

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Cubby · Answer 1

Payback period.

Explanation:

In this question, the payback period is used.

In the payback period, we have to compute the time duration in which the firm has recovered its initial investment amount.

And, the question says that the project pays for itself in 23 months which tell the time duration of the project in which the project amount can be recovered. Moreover, it does not consider the time value of money.