Question

Mansi Inc. is considering a project that has the following cash flow data. What is the project's payback? Year 0 1 2 3 Cash flows -$750 $300 $325 $350 Group of answer choices 1.91 years 2.12 years 2.36 years 2.59 years 2.85 years

Answer 1

The project's payback period based on Mansi Inc.'s cash flow data is B. 2.36 years

What is the payback period?

The payback period is a capital appraisal or budgeting tool that shows when a project's cash inflows can recoup the cash outflows.

Cash Flow Data and Calculations:

Year   Cash flows   Accumulated Balance

0            -$750            -$750

1              $300            -$450

2             $325            -$125

3             $350            $225

Prorated fund recovery period = 2.36 years as $125 of $350 is 0.36.

Thus, the project's payback period based on Mansi Inc.'s cash flow data is B. 2.36 years

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