# Payback period

ggordster
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Hi i am trying to calculate payback but cant seem to get the same answer that is in the book. The capital expenditure is £125 year 1 revenue £85, year 2 £110, year 3 £130... the answer in the book is 2 years 7 months but i cannot get that answer.....help

## Comments

2,034Registered, Moderator1 year and 4 months.The answer is not 2 years 7 months.

Occassionally some students add up all the inflows and divide their answer by the initial investment. I guess your answer has been done that way.

It takes less than 2 years afterall £85 +£110 > £125.

You are right to challenge the answer in your book.

Have a look at chapter 11 of http://eu.dummies.com/store/product/Management-and-Cost-Accounting-For-Dummies-UK-Edition.productCd-1118650492.html

This chapter addresses investment appraisal

And feel free to criticise me if I've made any mistakes

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