Question

"You invest $5,200 now and receive $3,900 at the end of year 1, $3,700 at the end of year 2, $3,500 at the end of year 3, and so on. In what year do you break even on your investment? Use the discounted payback approach and assume an annual interest rate of 4.8%, compounded annually. Enter your answer as an integer."

Answer 1

Year	cash flow	present value of cash flow = cash flow/(1+r)^n r= 4.8%	cumulative value of cash inflow
0	-5200
1	3900	3721.374	3721.374
2	3700	3368.83	1478.626 (5200-3721.374)	amount to be recovered
3	3500	3040.774
	Year when you will be at break even on investment	year before the final recovery +(amount to be recovere/present value of cash flow of the final year of recovery)	1+(1478.626/3368.33)	1.438979