Question

You are evaluating a project that will cost $500,000, but is expected to produce cash flows of $125,000 per year for 10 years, with the first cash flow in one year. your cost of capital is 11% and your company's preferred payback period is 3 years or less.

a. what is the payback period of this project

Answer 1

a. payback period=500000/125000=4 years