Payback: Quebec, Inc., is purchasing machinery at a cost of $3,768,966. The company's management expects the machinery to produce cash flows of $979,225, $1,158,886, and $1,881,497 over the next three years, respectively. What is the payback period?

2.13 years

Explanation:

The payback period is the time taken for the net inflows from a project to equal the amount invested into that project.

Year Outflow/inflow Balance

0 ($3,768,966) ($3,768,966)

1 $979,225 ($2,789,741)

2 $1,158,886 ($1,630,855)

3 $1,881,497 250,642

Additional period = 250,642 / 1,881,497 = 0.13

Payback period = 2.13 years