Training cost is $4,000 and a project required an initial investment of $30,000. If the project yields monthly savings of $2,000 beginning after 3 months, what is the payback period in months (before money costs and taxes)?
I bet the person who wrote this question is an accountant with a twisted sense of humor. 'No money costs and taxes' - yeah, right. I'm sticking with option C, 27 months.
Actually, I think the answer is C) 27. We need to consider the training cost as well, so the total investment is 30,000 + 4,000 = 34,000. Then the payback period would be 34,000 / 2,000 = 17 months.
I agree with Becky. The payback period is calculated by dividing the initial investment by the monthly savings, so it should be 30,000 / 2,000 = 15 months.
Bettyann
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