An investment project costs $10,000 and has annual cash flows of $2,870 for six
ID: 2716471 • Letter: A
Question
An investment project costs $10,000 and has annual cash flows of $2,870 for six years.
What is the discounted payback period if the discount rate is zero percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)
Discounted payback period years
What is the discounted payback period if the discount rate is 5 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)
Discounted payback period years
What is the discounted payback period if the discount rate is 20 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places, e.g., 32.16.)
Discounted payback period years
Explanation / Answer
Details Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Initial cost (10,000) Cash Inflows 2,870 2,870 2,870 2,870 2,870 2,870 Discount factor @0% return rate 1 1 1 1 1 1 1 PV of Cash Inflows 2,870 2,870 2,870 2,870 2,870 2,870 Discounted Payback Years =10,000/2,870= 3.48 years Details Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Initial cost (10,000) Cash Inflows 2,870 2,870 2,870 2,870 2,870 2,870 Discount factor @5% return rate 1 0.952 0.907 0.864 0.823 0.784 0.746 PV of Cash Inflows 2,733 2,603 2,479 2,361 2,249 2,142 Total PV of cash inflows 14,567 2,428 Discounted Payback Years = 3.93 years Details Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Initial cost (10,000) Cash Inflows 2,870 2,870 2,870 2,870 2,870 2,870 Discount factor @20% return rate 1 0.833 0.694 0.579 0.482 0.402 0.335 PV of Cash Inflows 2,392 1,993 1,661 1,384 1,153 961 Total PV of cash inflows 9,544 Discounted Payback Years = 0.00 years
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