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An investment project provides cash inflows of $1,275 per year for eight years. a. What is the project payback period if the initial cost is $4,100? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.) b. What is the project payback period if the initial cost is $5,150? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.) c. What is the project payback period if the initial cost is $11,200? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

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  1. Today, 15:31
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    The correct answer for option (a) is 3.22 years, option (b) is 4.04 years and for option (c) is 0 years.

    Explanation:

    According to the scenario, the given data are as follows:

    Cash inflow = $1,275

    Project payback period = Initial cost : Cash inflow

    (a). Initial cost = $4,100

    So, Project payback period = $4,100 : $1,275

    = 3.22 years

    (b) Initial cost = $5,150

    So, Project payback period = $5,150 : $1,275

    = 4.04 years

    (c). Initial cost = $11,200

    So, Project payback period = $11,200 : $1,275

    = 8.78 years

    As it is more than the eight years period, it never pays back.

    So, 0 years
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