Question

Question 2 (2 points) You have the following information on a project's cash flows. Year Cash flows. -$116,000 0 24,000 2 31,000 38,000 4 72,000 5 55,000 The project's payback is _years. Round it to two decimal places. Your Answer:

Answer 1

Projects Payback Period

Year	Annual cash flows ($)	Cumulative Annual cash flows ($)
0	-1,16,000	-1,16,000
1	24,000	-92,000
2	31,000	-61,000
3	38,000	-23,000
4	72,000	49,000
5	55,000	1,04,000

Payback Period = Years before full recover + (Unrecovered cash inflow at start of the year/cash flow during the year)

= 3.00 Year + ($23,000 / $72,000)

= 3.00 Year + 0.32 Years

= 3.32 Years

“Hence, the Projects Payback Period is 3.32 Years”