Question

Find payback period

Year	Project Cash Flow ($)
0	-15,000,000
1	5,500,000
2	4,250,000
3	3,333,333
4	2,050,000
5	1,250,000
6	1,250,000

Answer 1

Calculating the Payback Period:-

Year	Cash Flows of Project ($)	Cummulative Cash Flows of Project ($)
0	(15,000,000.00)	(15,000,000.00)
1	5,500,000.00	(9,500,000.00)
2	4,250,000.00	(5,250,000.00)
3	3,333,333.00	(1,916,667.00)
4	2,050,000.00	133,333.00
5	1,250,000.00	1,383,333.00
6	1,250,000.00	2,633,333.00
	2,633,333.00

Payback Period = Years before the Payback period occurs + (Cummulative cash flow in the year before recovery/Cash flow in the year before recovery)

= 3 years + (1916.667/2050.000)

= 3.93 years

So, Payback Period is 3.93 years