Calculate the payback period for a project that has the following cash flows? The required return is 12.0%.
Year | Cash Flow |
0 | $ (12,000) |
1 | $ 1,000 |
2 | $ 2,000 |
3 | $ 3,000 |
4 | $ 4,000 |
5 | $ 5,000 |
6 | $ 6,000 |
2.25 years
3.25 years
3.85 years
4.40 years
None of these are correct.
Year | Cash flows | Cumulative Cash flows |
0 | (12000) | (12000) |
1 | 1000 | (11,000) |
2 | 2000 | (9,000) |
3 | 3000 | (6,000) |
4 | 4000 | (2000) |
5 | 5000 | 3000 |
6 | 6000 | 9000 |
Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).
=4+(2000/5000)
=4.4 years
Calculate the payback period for a project that has the following cash flows? The required return...
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