(SOLVED) Company ABC Ltd is planning to make an investment in a project of manufacturing tires. The initial investment of the project is $180,000. Year Cash flows 1 $75,000 2. $50,000 3 $45,000 4 $25,000 5 $15,000 Determine the payback period of the project.
Discipline: Finance
Type of Paper: Question-Answer
Academic Level: Undergrad. (yrs 1-2)
Paper Format: APA
Pages: 1
Words: 27
Question
Company ABC Ltd is planning to make an investment in a project of manufacturing tires.
The initial investment of the project is $180,000. The cash flows generated from the project are as follows:
| Year | Cash Flows |
| 1 | $ 75,000 |
| 2 | $ 50,000 |
| 3 | $ 45,000 |
| 4 | $ 25,000 |
| 5 | $ 15,000 |
Determine the payback period of the project.
Answer choices:
a. 3 years
b. 3.4 years
c. 0.4 years
d. 2.6 years
Expert Solution Preview
| Cumulative | ||
| Year | Cashflow | Cashflow |
| 0 | - 180000 | -180000 |
| 1 | 75000 | -105000 |
| 2 | 50000 | -55000 |
| 3 | ||
