Consider the following ten-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows each year for years 1 through 10 are $200,000 per year. What is the payback period without discounting cash flows?
A) 10 years
B) 5 years
C) 2.5 years
D) 0.5 years
Answer: B
Explanation: B) $1,000,000/$200,000 per year = 5 years.
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