The correct answer of the question is 5 years.
If a project cost is only $100 up front and its annual benefits are $20/year then the payback period in years is 5 years.
What is project cost?
- Every project that an organization decides to work on generates some expenses. These expenses are of two types.
- Direct costs: it includes fixed labor, materials etc.
- Indirect costs: includes utility etc...
- The cost of the project is estimated by the project manager.
What is payback period?
- It refers to the time that a person/ company would take to return the money of investment.
- Payback period= cost of investment/ average annual cash flow
- It helps us in understanding how much time it would take to recover the initial costs.
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