An investment project costs $100,000. It is expected to have an annual net cash flow of $25,000 for five years. What is the project’s payback period (in year)? 

(provide your answer in the whole number)

The payback period is the amount of time it takes for an investment to generate enough cash flows to recover the initial cost. 

Given:
- Initial investment: $100,000
- Annual net cash flow: $25,000
- Number of years: 5 years

### Payback Period Calculation:

To calculate the payback period, you divide the initial investment by the annual net cash flow:

\[
\text{Payback Period} = \frac{\text{Initial Investment}}{\text{Annual Net Cash Flow}} = \frac{100,000}{25,000} = 4 \text{ years}
\]

The project’s payback period is **4 years**.

Would you like further explanation or have any questions?

Here are 5 related questions you might consider:
1. How would an increase in the initial investment affect the payback period?
2. What if the net cash flow was expected to change each year?
3. How does the payback period compare to other investment evaluation methods, such as NPV?
4. What would be the impact if the project generated a one-time large cash flow in one of the years?
5. What is the significance of the payback period in assessing the risk of an investment?

**Tip:** The payback period is a simple method to evaluate risk, but it doesn't account for the time value of money or cash flows beyond the payback period.

Learn how to calculate the payback period for an investment project costing $100,000 with an expected annual net cash flow of $25,000 over 5 years. Understand the concept and formula for determining payback period in finance and investment analysis.

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