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Chapter 20

Question 4

Payback

A project requires an initial investment of $1,000,000 and then earns net cash
inflows of $150,000 per year for 7 years.

What is the payback period?

$1,000,000/150,000 = 6.67 years.

Or 6 years + 0.67*12 months

6 years and 8 months.

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