It will cost $14,900 to acquire a hot dog cart. Cart sales are expected to be $16,200 a year for three years. After the three years, the cart is expected to be worthless as that is the expected life of the heating system. What is the payback period of the hot dog cart?

A) .87 year
B) .92 year
C) 1.03 year
D) 1.09 year
E) 1.14 year

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Laura Horton · Accepted Answer

Final Answer : B, Explanation :  The payback period is the time it takes for the investment to generate an amount of money equal to the cost of the investment. The cost of the hot dog cart is $14,900. With annual sales of $16,200, the payback period is calculated as the cost of the cart divided by the annual sales, which is $14,900 / $16,200 = 0.91975, which rounds to approximately 0.92 year.

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