Worthington inc. is considering a project that has the following cash flow data. what is the project's payback? year 0 1 2 3cash flows −$500 $150 $200 $300a. 2.03 yearsb. 2.25 yearsc. 2.50 yearsd. 2.75 yearse. 3.03 years

c. 2.50 years

Explanation:

In the payback, we analyze in how many years the invested amount is recovered. The computation is shown below:

In year 0 = $500

In year 1 = $150

In year 2 = $200

In year 3 = $300

If we sum the first 2 year cash inflows than it would be $350

Now we deduct the $350 from the $500 , so the amount would be $150 as if we added the fourth year cash inflow so the total amount exceed to the initial investment. So, we deduct it

And, the next year cash inflow is $300

So, the payback period equal to

= 2 years + ($150 ÷ $300)

= 2.50 years

In 2.50 yeas, the invested amount is recovered.

the earnings of a typical investor is around $1,000,000 to $10,000,000

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