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Payback and NPV

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Payback and NPV. A project has a life of 10 years and a payback period of 10 years. What must be true of project NPV?

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Solution Summary

Payback and NPV are discussed for a project with a 1 year life and 10 year payback period.

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Under the Payback Method, we compute the amount of time required for an investment to generate cash inflows sufficient to recover its initial cost. Based on this method, an investment is acceptable if its calculated payback period is less than some prespecified number of years. Hence this project's recovering the initial cost in 10 years. But ...

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