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A project has the following cash flows. What is the payback period?
Year | Cash Flow | |
0 | −$ | 10,000 |
1 | 1,800 | |
2 | 3,600 | |
3 | 5,000 | |
4 | 6,000 | |
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2.83 years
-
2.38 years
-
2.75 years
-
2.92 years
-
3.03 years
The payback period is the amount of years necessary to recover the initial investment of the project. With the discounted payback time, cash inflows are initially transformed to their current value using appropriate discount factor, then added to figure out the duration of the payback.
1 Answer