Given an initial investment of $765,000 and a payback period of 4.5 years, what is the amount of the increase in future cash flow?

Multiple choice question for Capital Budgeting and Cost Benefit Analysis. Select an option, then review the explanation below.

Explanation

To find the increase in future cash flow, multiply the annual cash inflow by the payback period. Given the initial investment of $765,000 and a payback period of 4.5 years, the total future cash flow increase is $3,442,500.

Practice related questions from the same subject.

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3.What type of cash flows are utilized in both the net present value and internal rate of return methods?
4.What is obtained by dividing the sum of recovered working capital and the net initial investment by 2?
5.What term describes the project's anticipated financial loss or gain calculated by discounting all cash inflows and outflows at the required rate of return?

Given an initial investment of $765,000 and a payback period of 4.5 years, what is the amount of the increase in future cash flow?

Explanation

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