Acme,Inc.is considering a four-year project that has an initial outlay or cost of $100,000.The respective future cash inflows from its project for years 1,2,3 and 4 are: $50,000,$40,000,$30,000 and $20,000.Will it accept the project if it's payback period is 31 months?
A)Yes,because it pays back in 25 months.
B)Yes,because it pays back in 28 months.
C)No,because it pays back in over 31 months.
D)No,because it pays back in over 35 months.

Question

Quizplus · Accepted Answer

The project pays back in 28 months, as the cumulative cash inflows reach $100,000 by the end of the 28th month.

Acme,IncIs Considering a Four-Year Project That Has an Initial Outlay