Question

57. A project has estimated annual net cash flows of $52,800. It is estimated to cost $675,840. Determine the cash payback period. Present the answer to one decimal place.
________ years

Answer 1

Payback period is the time it takes for a project to recover the initial capital spent.

In this case capital spend initially or estimated cash flow at the beginning was $675840, and annual cash inflow is $52800.

Since the net cash inflow is even,

Payback period = Beginning cash outflow/ annual net cash inflow

                               = 675840/ 52800

                               = 12.8 years

SO the payback period of the project is 12.8 years.