McKenna Sports Authority is getting ready to produce a new l

McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $842,500, and $1,245,000 over the next three years. What is the payback period for this project?

Solution

intital investment = 1,850,000

amount payed back after 2 years = 525000 + 842500 = 1,367,500

amount to be payed after 2 years = 1850000 - 1367500 = 482500

so

payback period = 2 + (482500/1245000) = 2.39 years ......................ans