Question

You are considering a project with an initial cost of $9,400. What is the payback period for this project if the cash inflows are $2,100, $3,200, $3,800, and $4,800 a year over the next four years, respectively?

Answer 1

Payback period is the time within which intial cost is recovered back.
Year	Cash flow	Cumulative cash flow
0	$       -9,400	$   -9,400
1	$         2,100	$   -7,300
2	$         3,200	$   -4,100
3	$         3,800	$      -300
4	$         4,800	$    4,500
Payback period		=	3+(300/4800)
		=	3.06 Years