- Capital Budgeting
- Capital Budgeting Ratios
- Payback Period and Discounted Payback Period
Calculating Payback and discounted Payback Period
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A project has an initial cost of $52,125, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital of 12%. What is the project's payback period and discounted payback?
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Please refer attached Excel file for better understanding of formula used.
Net cash inflows are uniform of $ 12000 per year.
Payback will be =Initial outlay/Annual cash inflow = 52125/12000=4.34375 years
Discounted Pay back period
Year Cash inflow PV Factor ...
Solution describes the steps for calculating payback and discounted payback period for a project.