Answer:
The payback period for the investment is 1.41 years
Explanation:
The payback period is the length of time it takes an investment to repay back the investment capital outlay committed to it at the inception of the project.
The payback period is computed as the initial investment divided by annual cash inflow
Initial investment is $1,200,000
Annual cash inflow is $850,000
Payback period=$1,200,000/$850,000= 1.41 years
We can express the 0.41 in months=0.41*12=4.92 approximately 5 months
