Question

An investment project provides cash inflows of $570 per year for eight years. what is the project payback period if the initial cost is $1,675?

Answer 1

Payback period is the time you have to wait for your funds to recover from its initial investment through cash inflows generated by your project. This is how economists appraise their project's viability. For even cash inflows, the equation is

Payback period = Initial investment/Cash inflows
Payback period = $1675/$570 per year
Payback period = 2.94 or approximately 3 years.