Question

If the cumulative discount cash flow is ($9,611) in year 5 and $3,808 in year 6, what is the discount payback period?

Answer 1

Given that cumulative discount cashflow in year5 is -$9611 and in year6 is $3808.

As cumulative discount cashflows are given, we can find absolute discount cashflow in Year6 as: 3808-(-9611)= 13419.

To find discounted cashback period, we should find out the period at which cumulative discounted cashback is 0. That will be at (9611/13419)th of 6th year= 71.62% of 6th year.

So, Discounted payback period is 5.7162 Years.

On rounding it to two decimals, it will be 5.72 Years.