Payback: Binder Corp. has invested in new machinery at a cost of $1,450,000. This investment is expected to produce cash flows of $640,000, $715,250, $823,330, and $907,125 over the next four years. What is the payback period for this project?

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The payback period is the time it takes for the cumulative cash flows to equal the initial investment. After 2 years, the cumulative cash flow is $1,355,250 ($640,000 + $715,250). In the third year, $94,750 more is needed to reach $1,450,000. Since the third year's cash flow is $823,330, the payback period is 2 + ($94,750 / $823,330) = 2.12 years.