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6 February, 13:00

Year Cash Flow 0 - $ 8,300 1 2,100 2 3,000 3 2,300 4 1,700 What is the payback period for the set of cash flows given above? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

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  1. 6 February, 14:54
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    3.53 years

    Explanation:

    The computation of the payback period is shown below:

    In year 0 = $8,300

    In year 1 = $2,100

    In year 2 = $3,000

    In year 3 = $2,300

    In year 4 = $1,700

    If we sum the first 3 year cash inflows than it would be $7,400

    Now we subtract the $7,400 from the $8,300, so the amount is $900 as if we added the fourth year cash inflow so the total amount exceed to the initial investment. So, we deduct it

    And, the next year cash inflow is $1,700

    So, the payback period equal to

    = 3 years + $900 : $1,700

    = 3.53 years
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