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I am stumped and I have done the work but I am still missing something.

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I am stumped and I have done the work but I am still missing something.

Find the payback period

Initial Overlay $8,930

Year 1 $3,200

Year 2 $3,880

Year 3 $3,510

During Year 1 the firm will recover $3,200 so (-$8,930)+ $3,200= -$5,730 still need to recover after the end of year 1

During Year 2 the firm will recover $3,880 so (-$5,730)+ $3,880= -$1,850 still need to recover after the end of year 2

During Year 3 the firm will receive $3,510 which is greater than $1850. Assuming that cash flows will be received gradually during year 3, it takes $1850/$3510= .53 of a year to recover $1,850.

 
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