Homework SourseWhich of the following elements is needed to calculate payba
Which of the following elements is needed to calculate payback ?
A. Investment
B. Annual cash inflow
C. Both a and b
D niether a nor b
Which of the following elements is needed to calculate payback ?
A. Investment
B. Annual cash inflow
C. Both a and b
D niether a nor b
A. Investment
B. Annual cash inflow
C. Both a and b
D niether a nor b
Solution
Answer:
Option c i.e. Both a and b is Correct.
Payback calculates the time period within which the amount invested will be recovered from the project.
To calculate, payback period, both Cash outflow i.e. Initial Investment and Annual Cash inflow will be needed.
Payback Period = Initial Investment / Annual Cash Inflow
