1. Find the Payback period for the following project:

	Project X
Initial Outlay	$8,610
Year 1	$3,190
Year 2	$3,290
Year 3	$3,750
Year 4	$7,470

The answer should be calculated to two decimal places. Initial outlay is $8,610.

During year 1 the firm will recover $3,190, so (-$8,610) +$3,190 = -$5,420 still need to recover after the end of year 1.

During year 2 the firm will recover $3,290, so (-$5420) +$3,290 = -$2,130 still need to recover after the end of year 2.

During year 3 the firm will receive $3,750, which is greater than $2,130. Assuming that cash flows will be received gradually during year 3, it takes $2,130/$3,750 = 0.57 of a year to recover $2,130.

Totally payback period is 2.57 years

PLEASE EXPLAIN HOW THE ANSWER IS 2.57 YEARS. IN STEP 3, WE GOT 0.57. WHERE DOES THE 2 COME FROM?

THANKS!