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    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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    Solution Preview

    Please refer attached Excel file for better understanding of formula used.

    Solution

    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 Summary

    Solution describes the steps for calculating payback and discounted payback period for a project.

    $2.19

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