Payback/discounted payback period
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The shop foreman at Santa Barbara Rig Service proposed a portable service unit requiring an initial outlay of $100,000 and providing the following year-end cash flows:
Year 1 2 3 4 5
Cash flow 30000 -50000 70000 60000 50000
At a 10% required return, find the payback period and present value payback period (discounted payback period) for the investment. Interpret these measures for a manager who is not trained in finance.
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Solution Summary
The solution explains how to calculate the payback and the discounted payback period.
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