An investment project has annual cash inflows of $5,000, $3,300, $4,500, and $3,

Question

An investment project has annual cash inflows of $5,000, $3,300, $4,500, and $3,700, for the next four years, respectively. The discount rate is 14 percent.

  

What is the discounted payback period for these cash flows if the initial cost is $5,100? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

  

What is the discounted payback period for these cash flows if the initial cost is $7,200? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

  

What is the discounted payback period for these cash flows if the initial cost is $10,200? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

An investment project has annual cash inflows of $5,000, $3,300, $4,500, and $3,700, for the next four years, respectively. The discount rate is 14 percent.

Explanation / Answer

Discounted Payback Period =

( Last Year with a Negative Cumulative Cash Flow ) + [( Absolute Value of negative Cumulative Cash Flow in that year)/ Total Present Cash Flow in the following year)]

initial cost is $5,100 :

= 1 + (-714.0350877/ 2,539.242844)

= 1.28 Years

initial cost is $7,200:

= 2+(274.7922438/ 3037.371823)

= 2.09 Years

initial cost is $10,200:

= 3+ (237.4204209/ 2190.697026)

= 3.11 years

Year Cash Flow Discounting Factor(14%) Present Value (Cash Flow * Discounting Factor) Cumulative Cash Flow 0 -5,100 1 -5100 -5100 1 5,000 0.877192982 4385.964912 -714.0350877 2 3,300 0.769467528 2539.242844 1825.207756 3 4,500 0.674971516 3037.371823 4862.579579 4 3,700 0.592080277 2190.697026 7053.276605

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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