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A project has the following cash flows over the next four years starting right now; -5000;...

A project has the following cash flows over the next four years starting right now; -5000; 1500; 1500; 3,190; 4000.

The project’s cost of capital is 8 percent. What is the project’s payback period?

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Answer #1

Payback Period Calculation :

Cumulative Cash Flow = Cash Flow in Previous Year + Cash Flow in Current Year

Now we will look for the Year Cumulative Cash Flow becomes positive that is year 03

We will take only positive value of Cumulatice Cash Flow (Y-1) for calculation

Pay back Period = 2.63

Ans : Projects Payback Period = 2.63

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