A project requires a $1,430,000 initial investment for new machinery. The project is expected to yield income of $115,000 per year and net cash flows of $260,000 per year for the next five years. The project’s payback period is

 A project requires a $1,430,000 initial investment for new machinery. The project is expected to yield income of $115,000 per year and net cash flows of $260,000 per year for the next five years. The project’s payback period is:

Multiple Choice

2.3 years.


5.5 years. Correct

3.8 years.


12.4 years.


5.1 years.

Explanation
Payback period = $1,430,000/$260,000 = 5.5 years