Answer:
The payback period for the $90000 investment is 5 years.
Explanation:
Payback period=Initial outlay/Annual net cash flow
This requires that the initial capital investment must be established,which is $90000
However, the investment gives expected incremental cash inflows of $50000 as well as outflows of $32000, as a result , annual net cash flow is $18000($50000-$32000)
In other words,payback period is $90000/$18000=5 years
The payback refers to number of years it takes the initial investment to be recouped.This means that any net cash inflows after 5 years are the project's return.
