Stewart Associates is considering a project that has the following cash flow dat

Question

Stewart Associates is considering a project that has the following cash flow data. What is the project's payback?

Year: 0 1 2 3 4 5 Cash flows: -$1,000 $300 $310 $320 $330 $340 Select one: A. 2.11 years B. 2.34 years C. 2.60 years D. 2.89 years E. 3.21 years Stewart Associates is considering a project that has the following cash flow data. What is the project's payback?

Year: 0 1 2 3 4 5 Cash flows: -$1,000 $300 $310 $320 $330 $340 0 1 2 3 4 5 -$1,000 $300 $310 $320 $330 $340 Select one: A. 2.11 years B. 2.34 years C. 2.60 years D. 2.89 years E. 3.21 years Select one: A. 2.11 years B. 2.34 years C. 2.60 years D. 2.89 years E. 3.21 years A. 2.11 years B. 2.34 years C. 2.60 years D. 2.89 years E. 3.21 years Year: 0 1 2 3 4 5 Cash flows: -$1,000 $300 $310 $320 $330 $340

Explanation / Answer

Hi,

Please find the answer as follows:

Total Investment till year 3 = 300 + 310 + 320 = 930

Therefore 70 (1000 - 930) will get recovered between Year 3 and Year 4.

Payback Period = 3 + 70/330 = 3.21

Option E is correct.

Thanks.

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