Answer:
It will take 3 years and 219 days to cover for the initial investment.
Explanation:
Giving the following information:
Initial investment= $56,000
Cash flow:
$21,500 in year 1
$23,100 in year 2
$19,000 in year 3
$13,900 in year 4
$15,200 in year 5
The payback period is the time required for the cash flow to cover the initial investment.
Year 1= 21,500 - 56,000= -34,500
Year 2= 23,100 - 34,500= -11,400
Year 3= 19,000 - 11,400= 7,600
To be more accurate:
(11,400/19,000)*365= 219
It will take 3 years and 219 days to cover for the initial investment.
Considering the situation described above, the payback period for the cooling equipment is 2.6 years.
The step by step is explained below for better illustration:
Given that Initial investment= $56,000
Where Cash flow in year 1 => $21,500
Cash flow in year 2 => $23,100
Cash flow in year 3 => $19,000
Cash flow in year 4 => $13,900
Cash flow in year 5 => $15,200
Therefore, the payback period is the time required for the cash flow to cover the original investment.
Hence, after two years, $44,600 ($21,500 + $23,100);
The amount left to be paid back is ($56,000 - $44,600) => $11,400
Therefore, $11,400 ÷ $19,000 = 0.6;
Thus, the total payback period is approximately 2.6 years.
Learn more about the payback period here: https://brainly.com/question/17109529
