A project has the following cash flows over the next four years starting right now; -5000; 1500; 1500; 3,608; 4000. The project’s cost of capital is 8 percent. What is the project’s payback period?
To calculate the payback period, we need to find the time that the project has recovered its initial investment. After two years, the project has created:
$1,500 + $1,500 = $3,000
in cash flows. The project still needs to create another:
$5,000 - $3,000 = $2,000
in cash flows. During the third year, the cash flows from the project will be $3,608. So, the payback period will be two years, plus what we still need to make divided by what we will make during the third year. The payback period is:
Payback = 2 + ($2,000 / $3,608) = 2.55 years
A project has the following cash flows over the next four years starting right now; -5000;...
A project has the following cash flows over the next four years starting right now; -5000; 2000; 2000; 2,863; 4000. The project’s cost of capital is 8 percent. What is the project’s net present value
A project has the following cash flows over the next four years starting right now; -5000; 2000; 2000; 2,863; 4000. The project’s cost of capital is 8 percent. What is the project’s net present value
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