Guerilla Radio Broadcasting has a project available with the

Guerilla Radio Broadcasting has a project available with the following cash flows: Cash Flow -$16,300 6,700 8,000 3,900 3,500 ear 0 2 4 What is the payback period? O 2.68 years O 2.41 years O 3.00 years O 1.59 years O 2.81 years

Solution

Year

Cash Flows

Cumulative net Cash flow

0

-16,300

-16,300

1

6,700

-9,600

2

8,000

-1,600

3

3,900

2,300

4

3,500

5,800

Payback Period =

2.41Years

Payback Period = Years before full recover + (Unrecovered cash inflow at start of the year/cash flow during the year)

= 2 Year + ($1,600 / 3,900)

= 2 Year + 0.41Year

= 2.41 Years

Hence, The Answer is “2.41 Years”

Year	Cash Flows	Cumulative net Cash flow
0	-16,300	-16,300
1	6,700	-9,600
2	8,000	-1,600
3	3,900	2,300
4	3,500	5,800
Payback Period =	2.41Years