Answer:
1.63 years
Explanation:
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows
Payback period = Amount invested / cash flow
= $325 / 200 = 1.625 years
Answer: 2. 1.63 years
Explanation;
Payback period is one way of checking to viability of a project by checking how long it will take for the project to pay back it's initial investment.
Payback Period = Year before Payback + (Amount remaining till payback/ Cash inflow in Year of Payback)
Cash inflow is $200 each so 2 years will bring in $400 which is more than the investment.
Year before payback is therefore 1 year.
Amount remaining till payback = 325 - 200 = 125
Cash inflow in Year of Payback being the second year is $200.
Payback Period = 1 + ( 125/200)
= 1 + 0.625
= 1.625
= 1.63 years
