Payback period is the time required to recover a project’s initial investment. It is often used to assess things such as

Financial risk,

Impact of an investment on liquidity,

Obsolescence risk, and

Impact of investment on performance measures

Information: Suppose that a new car wash facility requires an investment of $100,000 and either has: (a) even cash flows of $50,000 per year or (b) the following expected annual cash flows: $30,000, $40,000, $50,000, $60,000, and $70,000.

Calculate the payback period for each case

Answer rating: 100% (QA)

With even Cash flows PBP Initial cost of the venture Annual incremental cost 2 years With unev... View the full answer