Question

Project P has a cost of $1,000 and cash flows of $300 per year for 3 years plus another $1,000 in Year 4. The project’s cost of capital is 15%. What is P’s regular payback?

Answer 1

year	cash flow	cumulative cash flow
0	-1000
1	300	300
2	300	600
3	300	900
4	1000	100	amount to be recovered in year 4
Payback period = year before final year of recovery+(amount to be recovered in final year of recovery/cash flow of final year of recovery)	3+(100/1000)	3.1