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    susanaflo's Avatar
    susanaflo Posts: 1, Reputation: 1
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    #1

    Jun 9, 2009, 08:50 PM
    Cashflow project payback
    How can I calculate the projects payback if the there is a cashflow in yr 0 = -$1,000, yr 1 =300, yr 2 = 310, yr 3 = 320, yr 4 = 330, yr 5 = 340?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

    Jun 10, 2009, 05:01 AM
    A project's "payback", in the most common usage of that term in biz finance, is one way of evaluating a project which measures how quickly the initial investment is recovered in the cash inflows the project produces.

    In your example, you start "in the hole" by $1K (presumably the initial cost of the investment). Now, based on the cash flows the project produces starting in Yr 1, how long does it take to get that one grand back?

    The length of time you come up with is the project's "payback" or "payback period".

    Cheers!

    ...it was early and I was full of no coffee...
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