Turnbull Company is in the process of constructing a new plant at a cost of $30 million. It expects the project to generate cash flows of $13,000,000, $23,000,000, and 29,000,000 over the next three years. The cost of capital is 20 percent. Payback: What is the payback period for this project?

Question

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The payback period is the amount of time it takes for the project to generate enough cash flow to cover the initial investment. In this case, the initial investment is $30 million. The project is expected to generate cash flows of $13,000,000, $23,000,000, and 29,000,000 over the next three years. So, the total cash flow over the three years is $13,000,000 + $23,000,000 + $29,000,000 = $65,000,000. The payback period is then calculated as follows:Payback period = Initial investment / Total cash flowPayback period = $30,000,000 / $65,000,000Payback period = 1.7 years

Turnbull Company Is in the Process of Constructing a New