Problem:
Consider the following four-year project. The initial after-tax outlay is $550,000. The future after-tax cash inflows for years 1, 2, 3 and 4 are: $175,000, $250,000, $280,000 and $200,000, respectively.
Required:
Question: What is the payback period without discounting cash flows?
- 3.0 years
- 2.44 years
- 4.0 years
- 3.5 years
Note: Provide support for your underlying principle.