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It will cost $9,600 to acquire an ice cream cart that is expected to produce cash inflows of $3,600 a year for three years. After the three years, the cart is expected to be worthless. What is the payback period?

Respuesta :

Answer:2.67 years

Explanation:

Given

Initial investment = $9600

Annual cash inflow =$3600

Calculation of Payback period

Payback period = Initial investment/ Annual cash inflow

=9600/3600

=2.67 years

Payback period means the the period within which the initial investment can be recovered by doing any business activity. It also helps to choose the projects based on the pay back period. Business with less payback period means there are more cash inflows in the initial stage and investment amount can be gained sooner.

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