Question

Guerilla Radio Broadcasting has a project available with the following cash flows :

Year Cash Flow

0: −$15,200

1: 6,300

2: 7,600

3: 4,700

4: 4,300

What is the payback period?

Answer 1

Payback period= full years until recovery + unrecovered cost at the start of the year/cash flow during the year

Payback period= 2 years + $1,300/$4,700

                              = 2 years + 0.2766

                              = 2.2766 years   2.28 years.

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