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An investment project has annual cash inflows of $4,600, $3,700, $4,900, and $4,

ID: 2779183 • Letter: A

Question

An investment project has annual cash inflows of $4,600, $3,700, $4,900, and $4,100, for the next four years, respectively. The discount rate is 13 percent. What is the discounted payback period for these cash flows if the initial cost is $5,500? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Discounted payback period years What is the discounted payback period for these cash flows if the initial cost is $7,600? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Discounted payback period years What is the discounted payback period for these cash flows if the initial cost is $10,600? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Discounted payback period years

Explanation / Answer

Discounted PBP Time Amount PVf PV Cumulative                              -            (5,500.00)              1.00     (5,500.00)         (5,500.00)                         1.00             4,600.00              0.88        4,070.80         (1,429.20)                         2.00             3,700.00              0.78        2,897.64           1,468.44                         3.00             4,900.00              0.69        3,395.95           4,864.38                         4.00             4,100.00              0.61        2,514.61           7,378.99 PBP = 1 +1429.20/2897.64 PBP = 1.49 Years Discounted PBP Time Amount PVf PV Cumulative                              -            (7,600.00)              1.00     (7,600.00)         (7,600.00)                         1.00             4,600.00              0.88        4,070.80         (3,529.20)                         2.00             3,700.00              0.78        2,897.64            (631.56)                         3.00             4,900.00              0.69        3,395.95           2,764.38                         4.00             4,100.00              0.61        2,514.61           5,278.99 PBP = 2 + 631.56/3395.95 PBP = 2.19Years Discounted PBP Time Amount PVf PV Cumulative                              -          (10,600.00)              1.00 (10,600.00)      (10,600.00)                         1.00             4,600.00              0.88        4,070.80         (6,529.20)                         2.00             3,700.00              0.78        2,897.64         (3,631.56)                         3.00             4,900.00              0.69        3,395.95            (235.62)                         4.00             4,100.00              0.61        2,514.61           2,278.99 PBP = 3 + 235.62/2514.61 PBP = 3.09 Years

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