Question

Gio's Restaurants is considering a project with the following expected cash? flows:

Year	Project Cash Flow? (millions)
0	?$(210?)
1	100
2	72
3	100
4	90 If the? project's appropriate discount rate is 11percent, what is the? project's discounted payback? period? The? project's discounted payback period is ____ years? Round to 2 decimal places

Answer 1

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)]

= 2 + ( 61.47 / 73)

= 2.84 Years

Hence the correct answer is 2.84 Years

Note :

	Cash Flow	Discounting Factor ( 11%)	Present Value (Cash Flow * Discounting Factor)	Cumulative Cash Flow
0	-210	1	-210	-210
1	100	0.900900901	90	-119.91
2	72	0.811622433	58	-61.47
3	100	0.731191381	73	11.65
4	90	0.658730974	59	70.93