A project Kyle Company is considering will require an initial investment of $100,000 and is expected...
A project Kyle Company is considering will require an initial investment of $100,000 and is expected to generate the following cash flows:
Year 1 $35,000
Year 2 $25,000
Year 3 $20,000
Year 4 $20,000
Year 5 $15,000
What is the project’s payback period?
Homework Answers
| Year | Cash Flow $ | Cumulative Cash Flow $ |
| 1 | 35000 | 35000 |
| 2 | 25000 | 60000 |
| 3 | 20000 | 80000 |
| 4 | 20000 | 100000 |
| 5 | 15000 |
Project's Payback Period: 4 years
Since the project's cumulative cash flows equal its initial investment in year 4, the project's payback period is 4 years.
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