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Consider the following cash flows: Year Cash Flow -$7,800 3,100 3,200 2,200 1,400 What is the payback period for the above se
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Answer #1
Year Cash Flow Cumulative Cashflow
(currecnt cash flow + all previous cashflows)
1 3100 3100
2 3200 6300
3 2200 8500
4 1400 9900
As Initial Outlay is 7800, it will be recoverd
in between year 2 & 3. Therefore, Payback
Period will be between 2nd and 3rd year.
Payback Period will be 2 years + proportionate of 3rd year
Payback Period = 2+[(7800-6300)/(8500-6300)]
Payback Period = 2.682 years
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