Consider the following ten-year project.The initial after-tax outlay or after-tax cost is $1,500,000.The future after-tax cash inflows each year for years 1 through 10 are $400,000 per year.What is the payback period without discounting cash flows?
A)10 years
B)5 years
C)3.75 years
D)1.5 years

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash inflow. So, $1,500,000 / $400,000 = 3.75 years.

Consider the Following Ten-Year Project