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payback period equation?
Project Rocket-STAR costs $10,000 to invest in and provides for net cash-flows of $4,000 in year 1, $5,000 in year 2, $2,000 in year 3 and $3,000 in year 4. What is the payback period for Project Rocket-STAR?
1 Answer
- olliverLv 65 years ago
The net cash flow turns positive in year 3
-10000+4000+5000+2000 = 1000
Assuming the year 3 cash flow is even throughout the year, the pay pack period would be 2.5 years
-10000 +4000 +5000 +2000 x 0.5 = 0