An investment project has annual cash inflows of $4,800, $3,500, $4,700, and $3,

Question

An investment project has annual cash inflows of $4,800, $3,500, $4,700, and $3,900, and a discount rate of 15 percent.

What is the discounted payback period for these cash flows if the initial cost is $5,300? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Discounted payback period x years

What is the discounted payback period for these cash flows if the initial cost is $7,400? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Discounted payback period x years

What is the discounted payback period for these cash flows if the initial cost is $10,400? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Discounted payback period x years

Explanation / Answer

Year Cash Flow P.V. factor 15% P.V. of cash flows Cumulative P.V. 0 $   (5,300.00) 1.00000 $             (5,300.00) $          (5,300.00) 1 $      4,800.00 0.86957 $                4,173.91 $          (1,126.09) Discounted payback is between year 1 and year 2. Discounted payback = 1 + (1126.09/2646.50) = 1.43 years (Answer) 2 $      3,500.00 0.75614 $                2,646.50 $             1,520.42 3 $      4,700.00 0.65752 $                3,090.33 $             4,610.74 4 $      3,900.00 0.57175 $                2,229.84 $             6,840.58 Year Cash Flow P.V. factor 15% P.V. of cash flows Cumulative P.V. 0 $   (7,400.00) 1.00000 $             (7,400.00) $          (7,400.00) 1 $      4,800.00 0.86957 $                4,173.91 $          (3,226.09) 2 $      3,500.00 0.75614 $                2,646.50 $              (579.58) Discounted payback is between year 2 and year 3. Discounted payback = 2 + (579.58/3090.33) = 2.19 years (Answer) 3 $      4,700.00 0.65752 $                3,090.33 $             2,510.74 4 $      3,900.00 0.57175 $                2,229.84 $             4,740.58 Year Cash Flow P.V. factor 15% P.V. of cash flows Cumulative P.V. 0 $ (10,400.00) 1.00000 $           (10,400.00) $        (10,400.00) 1 $      4,800.00 0.86957 $                4,173.91 $          (6,226.09) 2 $      3,500.00 0.75614 $                2,646.50 $          (3,579.58) 3 $      4,700.00 0.65752 $                3,090.33 $              (489.26) Discounted payback is between year 3 and year 4. Discounted payback = 3 + (489.26/2229.84) = 3.22 years (Answer) 4 $      3,900.00 0.57175 $                2,229.84 $             1,740.58

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