At the same time as considering the hot dog van project, Jimmy is also considering investing £15,000 in the purchase of a fish and chip van. The van is expected to have an economic life of 5 years with no residual value after that time. The operator will drive the van around the main suburban areas of town and Jimmy’s research suggests that it will take some time to build up a customer base. The following table shows how the estimated net cash flows for this project are expected to gradually build up over the period.

Calculate the simple payback period for the fish and chip van project.

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Year 012345 Cash flow . (15,000) 3,000 4,000 5,000 6,000 7,000