A proposed project has the following costs and benefits:
Year  Costs  Benefits 
0  2,000  
1  1,000  
2  1,000  
3  1,000  
4  2,000  
5  2,000 
Assuming an interest rate of 10%, the project's simple payback period is most nearly _________.
A. 
2 years 

B. 
4 years 

C. 
6 years 

D. 
5 years 

E. 
7 years 
Using the information in Problem #3 and linear interpolation, the project's discounted payback period is most nearly ___________.
A. 
3.62 years 

B. 
2.33 years 

C. 
2.05 years 

D. 
3.41 years 

E. 
None of the above 
Ques 1 ) Part A 2 years
The benefits in 2 years(1000+1000) will become equal to the cost (2000).
Ques 2 ) Part B. 2.33 years
Formula for discounted period = Income/(1+r)^{t}
Year 
Income 
Discounted value 
Cummulative Value 
Balance 
1 
1000 
909.0909091 
909.0909091 
1090.90909 
2 
1000 
826.446281 
1735.53719 
264.46281 
3 
1000 
751.3148009 
2486.851991 
486.85199 
Discounted Payback = 2+264/752 = 2.35 years, which is nearest to part B.
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