Calculate the payback period (PP) for the cash flows provided in the table below. Note: The negative cash flow for year 0 is the initial investment for the project
Year Cash Flow
0 -$80,000
1 $32,000
2 $32,000
3 $32,000
A) 3 years
B) 2.50 years
C) 1.75 years
D) 1 year
B
Explanation: B) PP = $80,000/$62,000 = 2.5 years.
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