Question

Calculate the payback period of the following project: The required initial investment is $333,010 and its expected life is 7 years. Expected annual net operating income from the project is $28,600, including depreciation of $43,630. At the end of the project, the salvage value of the assets is expected to be $27,600. (Ignore income taxes.):

Required:

The payback period is: (Round your answer to 2 decimal places.) years

Answer 1

The payback period is 4.61 Years

Working

Payback Period
	Choose Numerator	/	Choose Denominator	=	Payback Period
	Initial Investment	/	Net annual cash inflow *	=	Payback Period
	$ 333,010	/	$ 72,230	=	4.61 Years

.

*

Net operating income	$           28,600.00
Add: Depreciation	$           43,630.00
Net annual cash inflow	$           72,230.00