payback period unit 6

meibaker

please someone help me onn payback period
net cash flow cumulative cash flow
0 (600) (600)
1 304 (296)
2 378 82
3 448 530
this is how i work out the payback period is 296/378x 12=9.4, so the pay back period is 1.94. but the answer is 1.78 year. where did i go wrong. many thanx

Bookworm55

You haven't gone very wrong, you just haven't been clear about what you've calculated.

1.94 years is not the payback period, what you worked out is that the payment period is 1 year, 9.4 months.

Which is also the same as 1.78 years (because of the 12 months to a year thing).

Just be sure to write it as one way or the other, because 1.94 years is wrong.

meibaker

oh i see. thanks for your help.