Example of payback period method, Finance Basics

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

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
Related Questions
ADan lives in Duncan, a small town in Arizona. Because of a rare blood disease, Dan is required to take special medical treatments once a month. The closest place these treatments

Show that for any constant 0=a=1, C(aK1 + (1-a)K2) = aC(K1) + (1-a)C(K2) where C(k) is the European option price with strike K. All the options in this question are assumed to be

Uncertainty and Safety Stocks Usually requirements may not be certain and thus the firm holds safety stock to safeguard stock out cases.The safety stock guards against delays

Financial Intermediaries These are institutions that link or mediate between the investors and savers: Some examples of financial intermediaries are as follow: 1. Comme

Legal Rules - Factors Influencing Dividend a) Net purchase rule States that dividend may be paid from company's profit either past or present. b) Capital impairment r

How are earnings calculated for the Pe ratio?

effect of gdp in the domestic market

Conditions for Lease Finance Lease finance is ideal within the following circumstances: a) Whenever the asset depreciates faster. b) Whenever the asset is matter to obso

An insurance company offers you and end of year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9%. What is the most you would be willin

Objectives or Goals of Business 1. Profit maximization - This is a traditional and a cardinal objective of a business.  This is so for the following purpose: To