Question

Baxter's Market is considering opening a new location with an initial cost of $149,200. This location...

Baxter's Market is considering opening a new location with an initial cost of $149,200. This location is expected to generate cash flows of $22,400, $31,500, $37,800, $46,300, and $18,000 in Years 1 to 5, respectively. What is the payback period?

A.

4.17 years
B.

3.17 years
C.

3.81 years
D.

4.62 years
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Homework Answers

Answer #1

Payback period= Full years until recovery + unrecovered cost at the start of the year/cash flow during the year

Payback period= 4 years + 11,200/ 18,000

                              = 4 years + 0.62

                              = 4.62 years.

Therefore, the payback period is 4.62 years.

Hence, the answer is option d.

In case of any query, kindly comment on the solution.

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