EKG,Inc.is considering a new project that will require an initial cash investment of $398,000.The project will produce no cash flows for the first two years.The projected cash flows for years 3 through 7 are $79,000,$88,000,$102,000,$140,000,and $160,000,respectively.How long will it take the firm to recover its initial investment in this project?
A)3.81 years
B)3.98 years
C)5.57years
D)5.92 years
E)The project never pays back.

Question

Quizplus · Accepted Answer

Payback = 5 + ($398,000 - $0 - $0 - $79,000 - $88,000 - $102,000)/$140,000 = 5.92 years

EKG,IncIs Considering a New Project That Will Require an Initial