Project M has a cost of $65,125, expected net cash inflows of $13,000 per year for ten years, and a cost of capital of 11%. What is the project's payback period (to the closest year)?

The payback period is the time it takes for a project to recover its initial investment from the net cash inflows it generates.

In this case:
- **Initial Investment (Cost)**: $65,125
- **Annual Net Cash Inflows**: $13,000 per year
- **Cost of Capital**: 11% (which is irrelevant to the payback period calculation, since it does not involve discounting cash flows)

The formula for the payback period is:

\[
\text{Payback Period} = \frac{\text{Initial Investment}}{\text{Annual Cash Inflows}}
\]

Substitute the values:

\[
\text{Payback Period} = \frac{65,125}{13,000} \approx 5.01 \text{ years}
\]

Thus, the **payback period** is approximately **5 years** (to the closest year).

Would you like more details or have any questions?

### Related Questions:
1. How is the discounted payback period different from the regular payback period?
2. How does the cost of capital affect a project's net present value (NPV)?
3. What are some disadvantages of using the payback period method?
4. How can the internal rate of return (IRR) be used to evaluate a project?
5. Why is it important to consider the time value of money when analyzing investments?

### Tip:
The payback period ignores the time value of money and cash flows beyond the payback period, which can lead to suboptimal decisions if used alone.

Discover how to calculate the payback period for Project M with an initial investment of $65,125 and annual net cash inflows of $13,000. This guide provides a clear explanation of the formula used and shows that the payback period is approximately 5 years. Ideal for finance students or professionals.

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