Computation of payback period of new product of Henry Hardware :
Payback period =
Initial investment ÷ Annual cash inflows
Initial Investment = $1512000
Annual cash inflows = $310000 + $270000 + ($240000×8)
= $2500000
5 years recovered = $ 1300000
Balance amount recovered = $212000 ÷ $240000
= 0.88 years.
Payback period = 5.88 years to take cover the initial investment.
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