An investment project has annual cash inflows of $3,600, $4,500, $5,700, and $4,

Question

An investment project has annual cash inflows of $3,600, $4,500, $5,700, and $4,900, and a discount rate of 15 percent.

What is the discounted payback period for these cash flows if the initial cost is $6,300? (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 $8,400? (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 $11,400? (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 $3,600, $4,500, $5,700, and $4,900, and a discount rate of 15 percent.

Explanation / Answer

a)If initial cost is $6300 Year Cash Flows Discounting Factor Discounted Cashflow Cummulative Discounted Cashflow 0 -6300 1 -6300 -6300 1 3600 0.8696 3130.43 -3169.57 2 4500 0.7561 3402.65 233.08 3 5700 0.6575 3747.84 3980.92 4 4900 0.5718 2801.59 6782.51 Discounted Payback period = 1 + (3169.57/3402.65)                                                                                       = 1.93 years b)If initial cost is $8400 Year Cash Flows Discounting Factor Discounted Cashflow Cummulative Discounted Cashflow 0 -8400 1 -8400 -8400 1 3600 0.8696 3130.43 -5269.57 2 4500 0.7561 3402.65 -1866.92 3 5700 0.6575 3747.84 1880.92 4 4900 0.5718 2801.59 4682.51 Discounted Payback period = 2 + (1866.92/3747.84)                                                                                       = 2.50 years b)If initial cost is $11400 Year Cash Flows Discounting Factor Discounted Cashflow Cummulative Discounted Cashflow 0 -11400 1 -11400 -11400 1 3600 0.8696 3130.43 -8269.57 2 4500 0.7561 3402.65 -4866.92 3 5700 0.6575 3747.84 -1119.08 4 4900 0.5718 2801.59 1682.51 Discounted Payback period = 3 + (1119.08/2801.59)                                                                                       = 3.40 years

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