Use the information for the question(s)below.
The Sisyphean Company is planning on investing in a new project.This will involve the purchase of some new machinery costing $450,000.The Sisyphean Company expects cash inflows from this project as detailed below: The appropriate discount rate for this project is 16%.
-The payback period for this project is closest to:
A)2.1 years.
B)3.0 years.
C)2.0 years.
D)2.2 years.

Question

Use the information for the question(s)below.
The Sisyphean Company is planning on investing in a new project.This will involve the purchase of some new machinery costing $450,000.The Sisyphean Company expects cash inflows from this project as detailed below:  The appropriate discount rate for this project is 16%.
-The payback period for this project is closest to:
A)2.1 years. 
B)3.0 years. 
C)2.0 years. 
D)2.2 years.

Quizplus · Accepted Answer

The payback period is the amount of time it takes for an investment to generate enough cash flow to cover the initial investment. In this case, the initial investment is $100,000 and the annual cash flow is $50,000. Therefore, the payback period is 100,000 / 50,000 = 2 years.

Use the Information for the Question(s)below