Year 1 2 3 4-7 Cash Flows $1,822,767 $3,911,838 $3,821,548 $1,168,125 Nugent Com

Question

Year
1 2 3 4-7 Cash Flows $1,822,767 $3,911,838 $3,821,548 $1,168,125 Nugent Communication Corp. is investing $7,660,570 in new technologies. The company expects significant benefits in the first three years after installation (as can be seen by the following cash flows), and smaller constant benefits in each of the next four years. What is the discounted payback period for the project assuming a discount rate of 10 percent? (Round answer to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0 for the answer.)

Explanation / Answer

Pv of inflow

1 yr = 1,822,767*0.909=1656895

2 yr=3,911,838*0.826=3231178

3 yr=3,821,548*0.7513=2871129

Cuulative cash

1 yr=1656895

2 yr=4888073

3 yr=7759202

Discounted payback=2 yr+(7660570-4888073)/(7759202-4888073)]*12=2 yr 11 month

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