Answer:
1.40 years
Explanation:
In the payback, we analyze in how many years the invested amount is recovered. The computation is shown below:
In year 0 = $50,000
In year 1 = $30,000
In year 2 = $50,000
In year 3 = $60,000
If we considered only year 1 cash inflows than it would be $30,000
Now we subtract the $30,000 from the $50,000, so the remaining amount would be $20,000 as if we added the second year cash inflow so the total amount exceed to the initial investment. Therefore, we deduct it
And, the next year cash inflow is $50,000
So, the payback period equal to
= 1 years + $20,000 ÷ $50,000
= 1.40 years
