It will cost $3,000 to acquire a small ice cream cart. Cart sales are expected t

Question

It will cost $3,000 to acquire a small ice cream cart. Cart sales are expected to be $2,200 a year for four years. After the four years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart?

2.93 years

0.34 years

0.73 years

5.45 years

1.36 years

It will cost $3,000 to acquire a small ice cream cart. Cart sales are expected to be $2,200 a year for four years. After the four years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart?

Explanation / Answer

Calculation of payback period:

Payback period determines the time required to get back the initial investment. The formula and calculation is as follows.

The payback period is 1.36 years which means the $3,000 of investment can be return back in 1.36 years.

Note:

Please let me know if the above solution is not visible as I used math type software for better clarity of solution. Please respond through comment section so that I could able to understand whether to use math type software or type manually.

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