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    Payback Method

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    A project has a cost (projected outflow of ($14,000) in year 0.

    This project has the following projected inflows in years 1-5:

    year 1 $ 2,000
    year 2 $ 4,000
    year 3 $ 7,000
    year 4 $ 7,000
    year 5 $ 7,000.

    When is the pay back? (year / months)___________________

    If this firm has a payback policy of 3 years, will this project meet that criteria?_____________

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    Solution Preview

    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. ...

    Solution Summary

    Payback Method is utilized in the solution.