Compute the payback statistic for Project A if the appropria

Compute the payback statistic for Project A if the appropriate cost of capital is 8 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow –$1,300 $470 $570 $580 $360 $160

Solution

Given that

cost of capital = 8% = 0.08

maximum allowable payback period is four years

Time: 0 1 2 3 4 5

Cash flow –$1,300 $470 $570 $580 $360 $160

Payback Period = Amount to be initially invested / Estimated Annual Net Cash Inflow.

Payback period = 2.45 years.