US Innovative Company, which is operating in the Application business, is evaluating the following projects: Project (A) requires an initial investment of $ 40,000 and is expected to generate annual Cash Flows After Tax (CFAT) of S 10,000 for four years, and Project (B) that requires an initial investment of $ 40.000 and is expected to generate annual Cash Flows After Tax (CFAT) of $ 25,000 for two years and $ 20.000 for another two years. The Company tends to recover its investment in 3 years. And the cost of capital is 10% for both projects.
Q – Based on the above details, the pay-back period for project (A): is
a. 2 Years
b. 4 Years
c. 3 Years
d. 4.4 Years