Training cost is $4,000 and a project required an initial investment of $30,000. If the project yields monthly savings of $2,000 beginning after 3 months, what is the payback period in months…

The correct answer is B. 20. Option B (20 months) is correct because the total investment is $4,000 (training) + $30,000 (initial) = $34,000, and at $2,000/month in savings it takes 17 months of savings to recoup that amount - but since savings don't begin until after month 3, you add that 3-month delay…

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Question

Training cost is $4,000 and a project required an initial investment of $30,000. If the project yields monthly savings of $2,000 beginning after 3 months, what is the payback period in months (before money costs and taxes)?

Options

How the community answered

(30 responses)

A
13% (4)
B
77% (23)
C
3% (1)
D
7% (2)

Explanation

Option B (20 months) is correct because the total investment is $4,000 (training) + $30,000 (initial) = $34,000, and at $2,000/month in savings it takes 17 months of savings to recoup that amount - but since savings don't begin until after month 3, you add that 3-month delay: 17 + 3 = 20 months.

A (10) is wrong because it ignores both the training cost and the 3-month delay - likely from dividing only part of the investment by $2,000. C (27) results from a miscalculation such as adding the 3-month delay multiple times or using an incorrect total. D (33) similarly inflates the delay or misapplies when savings begin.

Memory tip: Payback = (Total Cost ÷ Monthly Savings) + Delay Months. Always add all costs first, then add any waiting period before savings kick in.

Topics

#payback period#financial analysis#project investment#ROI calculation

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