The project has payback period of 1 and half of year .what does that mean 1. it will take the project 1 and half years before they start to incur costs 2. the project will be compiled in less than two years 3. the company will receive the profits for first 1 and half year of the project 4. it will take the project one and half year to cover the investment and start generating revenue
Answers
Answer:
The answer of the question is option 4. It will take the project one and half year to cover the investment and start generating revenue.
Explanation:
The given question is based on the definition of Payback Period.
Payback period refers to the period it takes to recover the cost of the investment.
For example, if we made an investment in stock of Rs. 5000 and it provides 50% return in a year i.e. Rs 2500 (5000*50%). In this case we can recover our total cost in two years Rs 2500 in first & Rs 2500 in second year. So the payback period is 2 years i.e. we can recover our investment amount in two years.
It is simply put as the length of time an investment taken to reach to break point i.e. where cost is equal to return.
Hence the answer of the question is option 4. It will take the project one and half year to cover the investment and start generating revenue.
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