Compute the discounted payback statistic for Project C if the appropriate cost o

Question

Compute the discounted payback statistic for Project C if the appropriate cost of capital is 7 percent and the maximum allowable discounted payback period is three years. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Compute the discounted payback statistic for Project C if the appropriate cost of capital is 7 percent and the maximum allowable discounted payback period is three years. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Explanation / Answer

Pv of yr 1 cash flow = 760/1.07 = 710.28

Pv of yr 2 cash flow = 690/1.07^2 = 602.67

Pv of yr 3 cash flow = 730/1.07^3 = 595.9

so, Discounted payback period = 2 - (-1700 + 710.28 + 602.67)/595.9

= 2.65 years

as it is less then 3 yrs so project should be accepted

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