Project X has an initial cost of $76,434, and its expected net cash inflows are $19,750 per year for 6 years. The firm has a WACC of 11 percent, and Project X’s risk would be similar to that of the firm’s existing assets. What is Project X’s payback period?
| a. |
3.87 years |
|
| b. |
3.51 years |
|
| c. |
3.39 years |
|
| d. |
3.00 years |
|
| e. |
4.00 years |
payback period=initial cost/annual cash flows
=76,434/19,750
which is equal to
=3.87 years (Approx).
Project X has an initial cost of $76,434, and its expected net cash inflows are $19,750...
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