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You discovered a project opportunity which costs 74,000$ today. The project generates 12,000$ in two years,...

You discovered a project opportunity which costs 74,000$ today. The project generates 12,000$ in two years, costs 4,000 in three years and then generates 30,000 for the next 5 years. What is the payback period of this project?

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Answer #1

Payback period is the time taken for the cumulative cash flows to equal zero

Payback period = 4 + (cash flow required in year 5 for cumulative cash flows to equal zero / year 5 cash flow) = 4 + ($28,000 / $30,000) = 4.93 years

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