Engineering Board Exam Reviewer · Benefit-Cost Ratio and Payback Period · medium
An investment of P500,000 returns P100,000, P150,000, P200,000, and P250,000 at the end of years 1 to 4. Find the payback period (ignoring interest).
- 3 years
- 3.5 years
- 3.2 years
- 4 years
Answer
C. 3.2 years
Solution
Cumulative returns: 100,000, 250,000, 450,000, 700,000. After year 3, P50,000 is still unrecovered, and year 4 returns P250,000. Payback =3+ 50,000250,000=3.2 years.
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