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

Question

Compute the discounted payback statistic for Project D if the appropriate cost of capital is 12 percent and the maximum allowable discounted payback is four years. (Do not round intermediate calculations and round your final answer to 2 decimal places. If the project does not pay back, then enter a "0" (zero).)

  

Compute the discounted payback statistic for Project D if the appropriate cost of capital is 12 percent and the maximum allowable discounted payback is four years. (Do not round intermediate calculations and round your final answer to 2 decimal places. If the project does not pay back, then enter a "0" (zero).)

Explanation / Answer

For discounted payback we used the net present value method

NPV ={ A1/(1+i)1. +A2/(1+i)2+.......+An(1+i)n}. - C

Where A1, A2......are the cash inflows

i = minimum desired rate of return= 12%

C is cash outflow= 12500

As the net present value is negative it mean project has never payback its value so it should not be accepted . It should be rejected.

Year Cash inflows p.v factor (from table) Total present value 1 3500 0.893 3125.5 2 4480 0.797 3570.56 3 1820 0.712 1295.84 4 0 0.636 0 Total P.v.of cash inflows 7991.90 p.v.of cash outflow 12500 Net present value -4508

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.