An investment of Rs. 100 lakhs is to be made for construction of a plant, which will take two years to start production. The annual profit from the operation of the plant is Rs. 20 lakhs. What will be the payback time ?
Correct answer: B. 7 years
- A. 5 years
- B. 7 years
- C. 12 years
- D. 10 years
Explanation
The operating payback period is Rs. 100 lakhs divided by Rs. 20 lakhs per year, or 5 years. Including the 2-year construction period gives 7 years from the initial investment, which is the interpretation used by the submitted key.
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