   Chapter 11, Problem 4P Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Solutions

Chapter
Section Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

PAYBACK PERIOD Refer to problem 11-1. What is the project’s payback?

Summary Introduction

To calculate: The payback period for the given project.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on the project. In other words, it is the time that a project takes to repay the amount invested with some return attached to the project.

Explanation

Given information:

Cost of the project is $65,000. Life of project is 9 years. Cash inflow from project per year is$12,000.

Cost of capital of the project is 9%.

The formula to calculate payback period is,

Paybackperiod=(YearoflastnegativeCumulativecashflow)+|LastnegativeCumulativecashflow|(PositivecashFlowin

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