Gibson Hardware is adding a new product line that will require an investment of $ 1 comma 520 comma 000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $ 325 comma 000 the first year, $ 270 comma 000 the second year, and $ 235 comma 000 each year thereafter for eight years. The investment has no residual value. Compute the payback period. First enter the formula, then calculate the payback period. (Round your answer to two decimal places.) ▼ + ( / ) = Payback

payback period is 5 years, 11 months

Explanation:

Payback Period is the length of time for the Total Cash flows to equal the initial capital Investment

Cash Flows           Project

Year 0                  (1,520,000)

Year 1                       325,000

Year 2                      270,000

Year 3                      235,000

Year 4                      235,000

Year 5                      235,000

Calculation of years

Payback period = 5 years (Total inflows are 1,300,000)

Calculation of months

Payback period = Remaining Amount/Net Cash flow in Next Month × 12

                          = (1,520,000-1,300,000)/235,000 × 12

                          = 220,000/235,000 × 12

                          = 11

Therefore payback period is 5 years 11 months

answervulnerability assessment;