PRC-2 · Chapter 6 · Question 6 of 45
A proposed factory upgrade costs Rs. 100,000 and is projected to generate Rs. 25,000 annually in uniform net cash inflows. What is the exact payback period for this upgrade?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 4 years
Explanation
When cash flows are uniform, the payback period is calculated as Initial Investment / Annual Cash Flow. Here, 100,000 / 25,000 = exactly 4 years.
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