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What is the payback period for the cash flows? consider the following cash flows: |year |Cash...

Question:

What is the payback period for the cash flows?

consider the following cash flows:

year Cash flow
0 -4650
1 1350
2 2450
3 1150
4 850

Payback Period:

The payback period is the time needed for cash flows from a project to cover the initial cost of the project. The lower the payback period, the more attractive is the project into consideration.

Answer and Explanation:

Using the initial cash flows as a basis, we first need to calculate the cumulative cash flow until it turns positive.

  • Cumulative Cash Flow for Year 1...

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Payback Analysis: Formula & Example

from Introduction to Management: Help and Review

Chapter 16 / Lesson 12
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