A company is considering two projects. Project I Project II Initial investment $200,000 $200,000 Cash inflow...
A company is considering two projects.
| Project I | Project II | |
| Initial investment | $200,000 | $200,000 |
| Cash inflow Year 1 | 50,000 | 60,000 |
| Cash inflow Year 2 | 50,000 | 60,000 |
| Cash inflow Year 3 | 50,000 | 80,000 |
| Cash inflow Year 4 | 50,000 | 10,000 |
| Cash inflow Year 5 | 50,000 | 50000 |
What is the payback period for Project II?
a.5 years
b.1 year
c.4.3 years
d.2.5 years
e.3 years
Homework Answers
The time taken to recover the initial investment is called payback period.
For Project-||, the initial investment is $200,000 and the cash inflows for 3yrs is amounting to $200,000.
Therefore, it is taking three years to recover the initial investment. Therefore, the payback period is 3yrs.
The correct option is e) 3yrs
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A company is considering two projects.
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