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Question
Seattle Inc. identified an investment opportunity that requires an initial cash outflow of $150,000. Seattle's required rate of return is 10 percent. The investment will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. Assume the cash flows occur evenly during the year. What is the traditional payback period for this investment?
a. 5.23 years
b. 4.86 years
c. 4.51 years
d. 6.12 years
e. 4.35 years
Answer
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