An investment project costs $10,000 and has annual cash flows of $2,820 for six

Question

An investment project costs $10,000 and has annual cash flows of $2,820 for six years.

What is the discounted payback period if the discount rate is 0 percent? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

What is the discounted payback period if the discount rate is 4 percent? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

What is the discounted payback period if the discount rate is 19 percent? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

An investment project costs $10,000 and has annual cash flows of $2,820 for six years.

Explanation / Answer

discounted payback period= 1/ (1+r)n, where r is the discounting rate and n is the time period.

if the discount rate is 0%, the the PBP= 10,000/ 2820= 3.546 years.

if the discount rate is 4%, then PBP is

=

so the PBP= 3 years + (2171/2411*12)= 3 years 11 months

years cash flow PV factor Discount cash inflow cumulative disc value 0 -10,000 1.00 -10,000 -10,000 1 2820 0.962 2712.84 -7,287.16 2 2820 0.925 2,608.5 -4,678.66 3 2820 0.889 2,506.98 -2,171.68 4 2820 0.855 2,411.1 239.42 5 2820 0.822 6 2820 0.790

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