1. Calculate Payback Period. It will cost $3,200 to acquire a small ice cream cart. Cart sales are expected to be $900 per year for at least 10 years. What is the payback period?
2. Payback Period Calculation. A project has an initial cost of $2,600. The cash inflows are $300, $500, $900, and $700 for Years 1 through 4, respectively. What is the payback period?
3. Payback Rule. Which one of the following statements is correct concerning the payback period as one technique for making financial, capital budgeting decisions?
A. An investment should be acceptable if its calculated payback period is less than whatever a firm specifies for such a project.
B. An investment should be accepted if the payback amount is positive and rejected if it is negative.
C. An investment should be rejected if the payback amount is positive and accepted if it is negative.
D. An investment is acceptable if its calculated payback period of time is greater than some pre-specified period of time.
E. An investment should be accepted any time the payback period is less than the discounted payback period, given a positive discount rate.