A project requires an initial cash outlay of $95,000 and has expected cash inflows of $20,000 annually for 9 years. The cost of capital is 10%. What is the project’s payback period?

The project’s payback period is 4.75 years ($95,000 / $20,000 = 4.75). The payback period is a measure of how long it will take the company to recover its initial investment in a given project. In this case, the company would be able to recoup their initial outlay of $95,000 after 4.75 years of receiving annual cash inflows of $20,000 each year.

In addition to the payback period; other metrics such as net present value (NPV) can also be used when assessing projects as it takes into account both the time value of money and opportunity costs associated with investing in one venture over another. For example, if NPV calculations indicate that expected returns from an investment are not sufficient enough then businesses may opt for other options which could yield higher returns over short or long-term horizons.

Overall understanding what factors go into determining payback periods can help companies make more informed decisions about their investments by providing them with greater insight into how quickly they will recuperate their funds while still maximizing profits on a longer timeline basis.