CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

An investment with an initial cost of $16,000 produces cash flows of $5000 annually. If the cash flow is evenly spread out over the year and the firm can borrow at 10%, the payback period is ______ years.

A. 3.20
B. 2.91
C. 3.33
Correct Answer: A

PP = 16000/5000 = 3.20

User Contributed Comments 4

User Comment
drago Borrowing cost is irrelevant - the financing and investment decisions are separate
sarath If it is discounted pay back then we have to use the "r" as the cost of capital.
azramirza Cf0=-16000
Cf1=5000
fo1=12
Yrazzaq88 1+(16,000-5000)/5000 = 3.2
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