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Payback period

Equipment 10 year useful life with no salvage value at end of 10 years. Company expects net annual cash inflows of 54,000. Internal rate of return is 14%. Discount rate is 14%. What is the payback period of equipment?

A 1.92 years
B 2.70
C 3.7
D 5.22

Solution Preview

At IRR the NPV is zero.
NPV = PV of inflows - initial investment
Using this we find out the initial investment
The inflows are 54,000 ...

Solution Summary

The solution explains how to calculate the payback period.