Question - Paula bought a machine costing $1,000, which will produce cash inflows of $1,400 over the next 4 years. Determine the payback period given the following cash flows.
Year After-Tax Cash Flows Cumulative Cash Flows
1 $400 $400
2 300 700
3 500 1,200
4 200 1,400
a. 2 years
b. 2.60 years
c. 2.86 years
d. 3 years