If the unrecovered cost at the start of the recovery year is $300, the cash flow during that year is $650 and there are 4 full years before recovery, what is the payback period?
Correct answer D. 4.46 years
Explanation
Payback equals the years before full recovery plus unrecovered cost divided by the recovery-year cash flow: 4 + 300/650 = 4 + 0.46 = 4.46 years.
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