Administration and Executive AssistantTier 530 minadvanced

Payback Period from Cumulative Cash Flow

Find the real payback period for a project with uneven cash flows, not the misleading shortcut.

What you will learn

• Build a running cumulative cash flow column starting from the initial outlay
• Find the first year the cumulative total reaches zero or above
• Explain why dividing the outlay by the average annual cash flow misleads when flows are uneven

Excel skills

MATCH, cumulative sums · Investment Appraisal

The task

This project's cash flows are heavily back-loaded - small in the early years, much bigger later. Work out the running cumulative cash flow year by year, and tell me the first year it turns positive. Don't just divide the outlay by the average annual flow - these flows are too uneven for that to give the real answer.

You work in a real spreadsheet in your browser, and your answer is checked against hidden traps the moment you submit.

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