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Homework answers / question archive / Determine the payback period of the two alternatives with cash flows tabulated below, Year Alternative A Alternative B 0 -1000 -2783 1 200 1200 2 200 1200 3 200 1200 4 200 1200 5 200 1200
Determine the payback period of the two alternatives with cash flows tabulated below, Year Alternative A Alternative B 0 -1000 -2783 1 200 1200 2 200 1200 3 200 1200 4 200 1200 5 200 1200
As they are even cash flows so formula of payback period is:-
Payback period= Initial Investment÷Annual Cash Inflow
Payback period of Alternative A= 1000÷200
So payback period of alternative A is 5 years
Payback period of Alternative B= 2783÷1200
So payback period of Alternative B is 2.32 years
