Homework Answers
PV of cashflow should turn equal to 100 to achieve payback.
Hence PV= A*(1-(1+r)^-n/r
Or 100=25*(1-(1+6%)^-n)/6%
Or, 100/25*0.06=1-1.06^-n
Or, 1.06^-n=1-0.24
Or, -nlog 1.06=log 0.76
Or, n=-log0.76/log1.06
Or, n=0.1192/0.0253
Or n=4.71
Hence payback is 4.71 years
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