How to calculate payback period?

Page no : 2

Mahalaxmi (job seeker) (1203 Points)
Replied 07 July 2013

project cash outflow is 200000.net cash inflow =

year 1 2 3 4 5

net cash inflow 99500 110000 96000 96000 68000

payback period = 1 yr + 100500\110000 =1.91 yrs

my question is how payback period is calculated 1 yr and why not 3 yr.

mvpranav (none) (43 Points)
Replied 06 January 2015

can anyone tell me how to use payback period approach in selecting a project.

Project A: intial investment-12000 economic life 8yrs estimated cash flows for each year-

2500 3500 4000 4000 3000 2000 1500 5000

Project B: intial investment-28000 and economic life 12yrs and estimated cash flows each year-

5000 6000 6000 8000 12000 13000 13000 13000 11000 8000 3000 500

which project should be taken up???????

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