Guerilla Radio Broadcasting has a project available with the following cash flows : Year Cash Flow 0 −$14,600 1 6,000 2 7,300 3 5,300 4 5,100 What is the payback period?
Guerilla Radio Broadcasting has a project available with the following cash flows : Year Cash Flow 0 −$14,600 1 6,000 2 7,300 3 5,300 4 5,100 What is the payback period?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Guerilla Radio Broadcasting has a project available with the following cash flows :
| Year | Cash Flow | |
| 0 | −$14,600 | |
| 1 | 6,000 | |
| 2 | 7,300 | |
| 3 | 5,300 | |
| 4 | 5,100 | |
What is the payback period?
Expert Solution
Step 1
Payback period, a type of capital budgeting, gauges how long it will take to recoup an investment's cost.
In case of uneven Cash Flows, Formula:
Payback Period = Years before Positive cumulative cash flows + -ve cumulative cash flows at beginning of the year / Cash flow during the year
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