An initial investment of $3,500,000 in a business opportunity can generate a net income of $900,000 per year

Economics Jun 23, 2021

An initial investment of $3,500,000 in a business opportunity can generate a net income of $900,000 per year. If i = 0%, the payback period is closest to 2.57 years.

Select one:

True

False

Expert Solution

Computation of Payback Period:

Payback Period = Initial Investment / Annual Cash Flow

= $3,500,000/$900,000

Payback Period = 3.89 years

As we can see, Payback period is 3.89 years. So, above statement is false.

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