Question
Big Puff Marijuana Inc is considering production of a new product called RocketWeed that has double the THC of any product now available. Tests have
Big Puff Marijuana Inc is considering production of a new product called RocketWeed that has double the THC of any product now available. Tests have shown RocketWeed has such potency that users can't walk for hours after use. Big Puff is concerned the the FDA may eventually outlaw RocketWeed so they will not launch the product without a relatively quick payback period. The new product will require an investment of $650,000, BigPuff's cost of capital is 8%; and the expected cash inflows for each of the following years are as follows:
1 $225,000
2 $335,000
3 $425,000
4 $600,000
What is the payback period?
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