Answer:
It will take 3.3 years to cover the initial investment.
Explanation:
Giving the following information:
Initial investment=$75,000
Year Cash Inflows
1 $20,000
2 23,000
3 17,000
4 50,000
5 20,000
The payback period is the time required to cover the initial investment.
Year 1= 20,000 - 75,000= -55,000
Year 2= 23,000 - 55,000= -32,000
Year 3= 17,000 - 32,000= -15,000
Year 4= 50,000 - 15,000= 35,000
To be more accurate:
(15,000/50,000)= 0.3
It will take 3.3 years to cover the initial investment.
