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Sagot :
The payback period for this investment is 3.5 years.
In the payback, we analyze in how many years the invested amount is recovered. The computation is shown below:
In year 0 = $32,000
In year 0 = $12,000
In year 1 = $8,000
In year 2 = $8,000
In year 3 = $20,000
In year 4 = $16,000
In year 5 = $16,000
If we sum the first 3 year cash inflows than it would be $36,000
Now we deduct the $36,000 from the $44,000 , so the amount would be $8,000 as if we added the fourth year cash inflow so the total amount exceed to the initial investment. So, we deduct it And, the next year cash inflow is $16,000
So, the payback period equal to
= 3 years + $8,000 ÷ $16,000
= 3.5 years
Therefore , we can say that In 3.5 years, the invested amount is recovered.
Learn more about Investment on:
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