Question

it will cost $3,900 to aquire a small ice cream cart. Net cash flow is expected to be $3,100 a year for five years. After the five years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart?

Answer 1

As per the details given in the information-
payback period = 1.26 years

Year	Cashflow	Cummulative CF
0	-3,900.00	-3,900.00
1	3,100.00	3,100.00
2	3,100.00	6,200.00
3	3,100.00	9,300.00
4	3,100.00	12,400.00
5	3,100.00	15,500.00

payback period= 1 year + {(3900-3100) / 3100
payback period = 1.26 years

I hope this clear your doubt.

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