Calculate Payback Period and Discounted Payback Period


1. It will cost $2,600 to acquire a small ice cream cart Cart sales are expected to be $1,400 a year for three years. After the three 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?

a.    0.86 years
b.    1.46 years
c.    1.86 years
d.    2.46 years
e.    2.86 years

2. Yancy is considering a project which will produce cash .inflows of $900 a year for 4 years. The project has a 9% requited rate of return and an initial cost of $2,800. What is the discounted payback period?

a.    3.11 years
b.    3.18 years
c.    3.82 years
d.    4.18 years
e.    Never


These multiple choice questions belong to Finance. The first question deals with cash inflows and pay back period. The second question is about calculating discounted payback period with cash inflows.


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