PRC-2 · Chapter 6 · Question 18 of 45
A firm invests Rs. 500 today. The project generates net cash inflows of Rs. 200 in Year 1, Rs. 200 in Year 2, and Rs. 300 in Year 3. What is the approximate non-discounted payback period?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 2.33 years
Explanation
By the end of Year 2, Rs. 400 has been recovered, leaving Rs. 100 remaining. In Year 3, Rs. 300 is generated. The fraction of the year needed is 100 / 300 = 0.33. Therefore, the payback period is 2.33 years.
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