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    SandraKay1's Avatar
    SandraKay1 Posts: 2, Reputation: 1
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    #1

    Nov 26, 2010, 05:12 PM
    Payback period
    Project K cost $52, 125, is expected net cash inflows are $12, 000 per year for 8 years, and it's WACC is 12%. What is the project's payback?
    Just Looking's Avatar
    Just Looking Posts: 1,610, Reputation: 480
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    #2

    Nov 30, 2010, 08:02 PM

    The payback period measures the time it takes to recoup the cost of the investment.

    Payback period = initial investment / net annual cash inflow

    One of the shortcomings of the payback period formula is that it doesn't take into consideration the time value of money. If you'd like to compute this and have it checked, post again. If you don't understand, please ask a specific question. Thanks.
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