Answer:
Payback Period : Period required to recover the cash outflow at initial stage.
Initial Cash Outflow : $50,000
Year | Net Income | Depreciation | Net Cash Flow | Commulative Cash Flow |
0 | (50,000) | ($50,000) | ||
1 | $3,300 | $10,000 | $13,300 | ($36,700) |
2 | $8,300 | $10,000 | $18,300 | ($18,400) |
3 | $30,000 | $10,000 | $40,000 | $21,600 |
4 | $12,400 | $10,000 | $22,400 | $44,000 |
5 | $33,200 | $10,000 | $43,200 | $87,200 |
Payback Period | 2.46 |
Payback : 2 Years + $18,400/$40,000 = 2.46 Years
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