Answer:
3.85 years
Explanation:
The payback period is the time that a company takes to recover its initial investment. Considering an initial investment of $8,500, and that cash flows are evenly distributed within each year, the payback period can be found by:
[tex]\begin{array}{ccc}\ year&cash\ flow&balance\\1&\$1,400&-\$7,100\\2&\$2,300&-\$4,800\\3&\$3,100&-\$1,700\\4&\$2,000&\$300\end{array}[/tex]
The payback period occurs sometime between years 3 and 4. The fraction of year 4 needed to reach payback is:
[tex]f=\frac{\$2,000-\$300}{\$2,000}\\f= 0.85[/tex]
The company needs 3 years and 0.85 of the fourth year to break even. Therefore, the payback period for Vulcan Materials Company is 3.85 years.
