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What is the payback for a project with the following cash flows? Cost Returns O ($10.000) 1 $4,500 2 $3,250 3 $3,000 4 $1,000
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Answer #1
Year Returns Cumulative Returns
0 (10,000) (10,000)
1 4500 (5500)
2 3250 (2250)
3 3000 750
4 1000 1750

Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

=2+(2250/3000)

=2.75

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