An investment project provides cash inflows of $745 per year for eight years. What is the project payback period if the initial cost is $1,700? What if the initial cost is $3,300? What if it is $6,100? Ross, Stephen, Ross, Stephen. Fundamentals of Corporate Finance (Kindle Locations 14578-14580). McGraw-Hill Higher Education. Kindle Edition.

2.28 years

4.43 years

8.19 years

Explanation:

Payback period is the time period in which initial investment of a project is recovered.

Initial cost = $1,700

Pay back period = Initial Investment / Yearly cash inflow

Pay back period = $1,700 / $745 = 2.28 years

Initial cost = $3,300

Pay back period = Initial Investment / Yearly cash inflow

Pay back period = $3,300 / $745 = 4.43 years

Initial cost = $6,100

Pay back period = Initial Investment / Yearly cash inflow

Pay back period = $6,100 / $745 = 8.19 years

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