An investment project provides cash inflows of $1,275 per year for eight years. a. What is the project payback period if the initial cost is $4,100? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.) b. What is the project payback period if the initial cost is $5,150? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.) c. What is the project payback period if the initial cost is $11,200? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

Question

Tianna

Business

11 July, 19:32

An investment project provides cash inflows of $1,275 per year for eight years. a. What is the project payback period if the initial cost is $4,100? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.) b. What is the project payback period if the initial cost is $5,150? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.) c. What is the project payback period if the initial cost is $11,200? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

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Answers (1)

Know the Answer?

Deanna Frank · Answer 1

The correct answer for option (a) is 3.22 years, option (b) is 4.04 years and for option (c) is 0 years.

Explanation:

According to the scenario, the given data are as follows:

Cash inflow = $1,275

Project payback period = Initial cost : Cash inflow

(a). Initial cost = $4,100

So, Project payback period = $4,100 : $1,275

= 3.22 years

(b) Initial cost = $5,150

So, Project payback period = $5,150 : $1,275

= 4.04 years

(c). Initial cost = $11,200

So, Project payback period = $11,200 : $1,275

= 8.78 years

As it is more than the eight years period, it never pays back.

So, 0 years