An investment project has annual cash inflows of $3,700, $4,600, $5,800, and $5,
ID: 2733737 • Letter: A
Question
An investment project has annual cash inflows of $3,700, $4,600, $5,800, and $5,000, and a discount rate of 13 percent. What is the discounted payback period for these cash flows if the initial cost is $6,400? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Discounted payback period?
What is the discounted payback period for these cash flows if the initial cost is $8,500? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Discounted payback period ?
What is the discounted payback period for these cash flows if the initial cost is $11,500? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Discounted payback period ?
Explanation / Answer
Annual Cashflow Year 1 = $3,700
Discounted Cashflow Year 1 = 3700/1.13 = 3,274.34
Annual Cashflow Year 2 = $4,600
Discounted Cashflow Year 2 = 4600/1.13^2 = 3,602.47
Annual Cashflow Year 3 = $5,800
Discounted Cashflow Year 3 = 5800/1.13^3 = 4,019.69
Annual Cashflow Year 4 = $5,000
Discounted Cashflow Year 4 = 5000/1.13^4 = 3,066.59
Answer 1.
Initial Cost = $6,400
Discounted Payback period = 1 + 3125.66/3602.47
= 1.87 Years
Answer 2.
Initial Cost = $8,500
Discounted Payback period = 2 + 1623.19/4019.69
= 2.40 Years
Answer 3.
Initial Cost = $11,500
Discounted Payback period = 3 + 603.5/3066.59
= 3.20 Years
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