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 practiced a similar question where we had to account for savings starting after a few months. I think it might be around 27 months, but I could be wrong.
I think we need to add the training cost to the initial investment, so that's $34,000 total. Then we can figure out how many months it takes to recover that.
Wait, what? I'm a bit confused. Do we need to factor in the training cost or just the initial investment? I want to make sure I understand this properly before attempting to solve it.
Okay, let's think this through step-by-step. We have the initial investment, the monthly savings, and we need to find the payback period. I think I can work this out.
This seems straightforward. I just need to calculate the total savings over time until it equals the initial investment. I'm confident I can get the right answer.
I'm pretty confident I know the answer to this one. The "managed strategy" objective is all about delivering value through incremental changes, so I'm going with option A.
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.
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