RatedrillPayback period
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
A machine costs $110,000 and is expected to save $34,000, $30,500, $51,000, $42,500 and $32,000 in years 1 to 5, earned evenly through each year. What is its payback period in years, to 2 decimals?
What this problem teaches
In a sheet, a running SUM column next to the cash flows shows the year the total crosses the cost.
A hint if you get stuck
Add up the savings year by year. In the year the total passes the cost, take the fraction: amount still unrecovered / that year's saving.
This problem is part of Pro
Pro unlocks all 53 problems, with worked solutions and progress saved to your account. The free problems work without an account.
You create a free account first, so Pro is attached to it.
Monthly is charged today and then every month until you cancel, in one click from your account page. Lifetime is one payment with no renewals. Full refund within 14 days of paying.