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An investment project requires an initial investment of $100,000. The project is expected to generate net cash inflows of $28,000 per year for the next five years. These cash inflows occur evenly throughout the year. Assuming a 12% discount rate, the project's payback period is (Ignore income taxes.): Multiple Choice
A .0.28 years
B. 3.36 years
C. 3.57 years
D. 1.40 years

Respuesta :

beritop1089

Answer:

C. 3.57 years

Explanation:

Payback period is the number of years a project takes to fully recover the initial amount invested.

Yr    CF                    Net CF

0 = -100,000          -100,000

1 =28,000               - 72,000

2 =28,000              - 44,000

3 =28,000             -16,000

4 =28,000               12,000

5 =28,000               40,000

Payback period= Last yr with -Net CF +[tex]\frac{(absolute  Net CF  that year)}{Total CF the  following  year}[/tex]

Payback = 3 +(16,000/28,000)

             =3 +0.57

             =3.57 years

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