payback period

[rbcc]

Hi I'm having trouble calculating the payback period

CF (years 1 to 5)

100
2000
5000
1000
2500

Initial investment 3000

I don't know if I'm calculating this in the correct way

3000-(100+2000)=900

900/5000=0.18

2+0.18=2.18

Thank You,
Rbcc

 

[tkhunny]

Perhaps you could present the entire problem statement?

 

[rbcc]

the above information is given in a table along with other projects ( the data given are annual cash flows in millions) , the question reads If the cost of capital is 5% and the firm requires a payback period of 2 years, calculate the payback period for each project.

 

[tkhunny]

100
2000
5000
1000
2500

Initial investment 3000

i = 0.05

Time 0: -3000
Time 1: -3000(1+i) + 100 = -3050
Time 2: -3000(1+i)^2 + 100(1+i) + 2000 = -1203
Time 3: -3000(1+i)^3 + 100(1+i)^2 + 2000(1+i) + 5000 = 3737

What are we looking for?