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An initial investment of ₹10,00,000 generates uniform annual cash flows of ₹2,50,000. Payback Period is:
A2 years
B4 years
C3 years
D5 years
Answer & Solution
Correct answer: B. 4 years
1. Payback = Initial Investment / Annual Cash Flow.
2. = 10,00,000 / 2,50,000.
3. Result = 4 years.
_Source: ICAI BoS CA Inter Paper 6A, Ch 7 "Investment Decisions", §6 — Payback_