Problem 9-4 Calculating Discounted Payback [LO3] An investment project has annua

Question

Problem 9-4 Calculating Discounted Payback [LO3]

An investment project has annual cash inflows of $4,900, $3,400, $4,600, and $3,800, and a discount rate of 13 percent.

What is the discounted payback period for these cash flows if the initial cost is $5,200? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the discounted payback period for these cash flows if the initial cost is $7,300? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the discounted payback period for these cash flows if the initial cost is $10,300? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

An investment project has annual cash inflows of $4,900, $3,400, $4,600, and $3,800, and a discount rate of 13 percent.

Explanation / Answer

so Discounted Cash Flows

4,900/1.13 = $ 4336.28

3,400/1.13^2 = $ 2662.7

4,600/1.13^3 = $ 3188.03

3800/1.13^4 = $ 2330.61

1)

1+ (5200 - 4336.28)/2662.7 = 1.32 years

2)

1 + 1 + (7,300 - 4336.28 - 2662.7)/3188.03 = 2.09 years

3)

1 + 1+ 1 +( 10,300 - 4336.28 - 2662.7 - 3188.03)/2330.61 = 3.05 years

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