The net initial investment for a piece of construction equip

The net initial investment for a piece of construction equipment is? $3,000,000. Annual cash inflows are expected to increase by? $500,000 per year. The equipment has an

8?year useful life. What is the payback? period?

Solution

Initial Cost = $3,000,000
Annual Cash Inflow = $500,000
Useful Life = 8 years

Payback Period = Initial Cost / Annual Cash Inflow
Payback Period = $3,000,000 / $500,000
Payback Period = 6.0 years

So, payback period of this project is 6 years.