You are evaluating a project with an initial investment of 1

You are evaluating a project with an initial investment of $15.5 million dollars, and expected cash flows of $8 million dollars each for years 1-3. What is the project\'s simple payback? The corporate WACC is 8%.

Solution

Initial Investment = $15,500,000
Annual Cash Inflow = $8,000,000

Payback Period = Initial Investment / Annual Cash Inflow
Payback Period = $15,500,000 / $8,000,000
Payback Period = 1.94 years