Problem:
The firm has has a potential future projects that will generate cash flows of $32,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10%.
Required:
Question: What is the payback period for this investment?
- 4.35 years
- 4.62 years
- 3.72 years
- 4.86 years
- 5.232 years
Note: Provide support for your rationale.