What is the payback period for the following set of cash flows?  Year Cash Flow0 −$ 4,200       1 1,300       2 1,400       3 1,900       4 2,800         Multiple Choice2.81 years2.93 years2.74 years2.79 years3.09 years

The payback period is the time it takes for an investment to generate an amount of income or cash equal to the cost of the investment. Here's how you calculate it for the given cash flows:

Year 0: -$4200 Year 1: +$1300 (Total: -$2900) Year 2: +$1400 (Total: -$1500) Year 3: +$1900 (Total: +$400)

So, by the end of Year 3, the investment has paid back the initial outlay of $4200. However, since the cash flow in Year 3 exceeds the remaining balance at the end of Year 2 ($1500), the payback period is actually somewhere in the middle of Year 3.

To find the exact payback period, you would divide the remaining balance at the end of Year 2 ($1500) by the cash flow in Year 3 ($1900). This gives you the fraction of Year 3 that it takes to fully pay back the investment.

$1500 /$1900 = 0.7895

So, the payback period is 2 years (Years 1 and 2) plus about 0.79 years (part of Year 3), which is approximately 2.79 years.

Therefore, the correct answer is 2.79 years.

The payback period is the time it takes for an investment to generate an amount of income or cash equal to the cost of the investment. Here's how you calculate it for the given cash flows:

1. In year 0, you made an investment of $4,200.

2. In year 1, you received a cash flow of $1,300. Subtract this from the initial investment:$4,200 - $1,300 =$2,900. This is the remaining amount that needs to be recovered.

3. In year 2, you received a cash flow of $1,400. Subtract this from the remaining amount:$2,900 - $1,400 =$1,500. This is the remaining amount that needs to be recovered.

4. In year 3, you received a cash flow of $1,900. Subtract this from the remaining amount:$1,500 - $1,900 = -$400. This means that you have recovered the initial investment and even have an extra $400.

However, you didn't receive the $1,900 all at once at the beginning of year 3, but throughout the year. So, the payback period is somewhere in year 3. To find out when exactly, you can calculate the fraction of the year by dividing the extra amount by the cash flow of year 3:$400 / $1,900 ≈ 0.21.

So, the payback period is 2 years and about 21% of year 3, which is approximately 2.21 years. This is not one of the options, so it seems there might be a mistake in the question or the provided options.