The payback of a project is the number of years it takes before the project’s total cash flow is…

The payback of a project is the number of years it takes
before the project’s total cash flow is positive. Payback ignores the time
value of money. It’s interesting, however, to see how differing assumptions on
project growth impact payback. Suppose, for example, that a project requires a
$300 million investment at year 0 (right now). The project yields cash flows
for 10 years, and the year 1 cash flow will be between $30 million and $100
million. The annual cash flow growth will be between 5% and 25% per year.
(Assume that this growth is the same each year.) Use a data table to see how
the
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The payback of a project is the number of years it takes
before the project’s total cash flow is positive. Payback ignores the time
value of money. It’s interesting, however, to see how differing assumptions on
project growth impact payback. Suppose, for example, that a project requires a
$300 million investment at year 0 (right now). The project yields cash flows
for 10 years, and the year 1 cash flow will be between $30 million and $100
million. The annual cash flow growth will be between 5% and 25% per year.
(Assume that this growth is the same each year.) Use a data table to see how
the project payback depends on the year 1 cash flow and the cash flow growth
rate.

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