Question

An investment project provides cash inflows of $600 per year for eight years.

What is the project payback period if the initial cost is $1,725? (Do not round intermediate calculations. Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)

Payback period             years

What is the project payback period if the initial cost is $3,350? (Do not round intermediate calculations. Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)

Payback period             years

What is the project payback period if the initial cost is $5,000? (Do not round intermediate calculations. Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)

Payback period             years

Answer 1

a)	project payback period if the initial cost is $1,725
	Year	Cash Flow	Cumulative Cash Flow
	0	-1725	-1725
	1	600	-1125
	2	600	-525
	3	600	75
	4	600	675
	5	600	1275
	6	600	1875
	7	600	2475
	8	600	3075
	TOTAL	3075
	Payback Period =	2 YEARS + 525/600
		2.88 years
b)	project payback period if the initial cost is $3,350
	Year	Cash Flow	Cumulative Cash Flow
	0	-3350	-3350
	1	600	-2750
	2	600	-2150
	3	600	-1550
	4	600	-950
	5	600	-350
	6	600	250
	7	600	850
	8	600	1450
	TOTAL	1450
	Payback Period =	5 YEARS + 350/600
		5.58 years
c)	project payback period if the initial cost is $5,000
	Year	Cash Flow	Cumulative Cash Flow
	0	-5000	-5000
	1	600	-4400
	2	600	-3800
	3	600	-3200
	4	600	-2600
	5	600	-2000
	6	600	-1400
	7	600	-800
	8	600	-200
	TOTAL	-200
	Payback Period =	0 years