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.)

Question

Business

Mckee

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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Aisha · Answer 1

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