Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows and net income The payback period of this project will be a 2 5 years b 2 6 years c 3 0 years d 3 3 years After Tax Cash Flows Net Year Income $(20,000) 6,000 2,000 6,000 2,000 8,000 ...

Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows

Question:

Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows and net income:

After-Tax Cash Flows Net Year Income $(20,000) 6,000 2,000 6,000 2,000 8,000 2,000 2,000 4 8,000

The payback period of this project will be:

a. 2.5 years.

b. 2.6 years.

c. 3.0 years.

d. 3.3 years.

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...

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