Example of Payback Period Method

Suppose a project costs Sh.80,000 and will produce the following cash inflows as:

                                 Cash inflows      Accumulated inflows

Inflows year 1 =          10,000               10,000

Inflows year 2 =          30,000               40,000

Inflows year 3 =          15,000               55,000

Inflows year 4 =          20,000               75,000

Inflows year 5 =          30,000               105,000

The Sh.80, 000 costs is recovered between year 4 and 5. Throughout year 5 (after year 4) Sh.5, 000 is (80,000 - 75,000) is required out the total year 5 cash flows of 30,000

Hence the PBP = 4yrs+ (5,000/30,000)                                              

= 4.17 years

Posted Date: 1/30/2013 5:00:44 AM | Location : United States

Ask an Expert

Related Discussions:- Example of payback period method, Assignment Help, Ask Question on Example of payback period method, Get Answer, Expert's Help, Example of payback period method Discussions

Write discussion on Example of payback period method
Your posts are moderated

Write your message here..

Related Questions

Financial planning processes, explain the financial planning process in a p... explain the financial planning process in a private limited company

The case of Apple, From the above case shareholders are very worried that a... From the above case shareholders are very worried that apple is having too much cash,discuss six reasons why shareholders are so worried

Real estate, A home buyer lists her home at a 7% commission rate and wants ... A home buyer lists her home at a 7% commission rate and wants to net 45,000 after paying the mortgage balance of 68,000 and the broker''s commission. To the nearest dollar, what sh

State the determinants of return, State the Determinants of Return T... State the Determinants of Return Three major determinants of the rate of return expected by investor are: (i) Time preference risk-free real rate. (ii) Expected rate o

Component ratings under the camel rating system, Question: (a) Describe... Question: (a) Describe the process for assigning composite and component ratings under the CAMEL rating system. (b) The IMF has developed some indicators to identify early

What is a treasury bill, What is a Treasury bill? How risky is it? Trea... What is a Treasury bill? How risky is it? Treasury bills are short-term debt instruments granted by the U.S. Treasury which are sold at a discount and pay face value at maturit

Discuss potential problems of internal finance, Internal finance can avoid ... Internal finance can avoid the agency costs of debt and equity finance. In practice it is the most important source of funding.   (a)  Discuss potential problems of internal finan

Control of pattern formation, Control of Pattern Formation Limbs such... Control of Pattern Formation Limbs such as all other organs have a pattern. What factor (or factors), environmental affects etc. are responsible for specific positioning of i

Eye field - vertebrate eye, Eye Field - Vertebrate Eye The development... Eye Field - Vertebrate Eye The development of eyes starts with evagination of the lateral wall of the forebrain. one on each side, which make the optic vesicles. By vital dye

Developer’s budget calculation, A prospective developer is considering purc... A prospective developer is considering purchasing a site for the construction of a ‘Business Village’ at a price of £750 000. It will provide a let-able office floor space of 17 50