Problem
A capital budgeting project is expected to have the following cash flows. The company requires a 10% required rate of return and payback period less than 5 years.
|
Year
|
Cash Flows
|
Cumulative Cash Flows
|
|
0
|
- $1,000,000
|
|
|
1
|
$400,000
|
|
|
2
|
$400,000
|
|
|
3
|
$200,000
|
|
|
4
|
$400,000
|
|
What is the project's payback period?