Question

A project has an initial cost of $17,800 and produces cash inflows of $7,200, $8,900, and...

A project has an initial cost of $17,800 and produces cash inflows of $7,200, $8,900, and $7,500 over three years, respectively. What is the discounted payback period if the required rate of return is 16 percent?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Discounted Payback Period is the time required to generate sufficient present value of future cash flow which equals the initial cost of the project.

Initial Cost = $17800

Required Rate of return = 16%

Year Future Cashflow    PV of Future Cashflow    Cumulative Cashflow Time Utilized
1 7200 7200/(1+0.16)^1 = 6206.90 6206.90 1
2 8900 8900/(1+0.16)^2 = 6614.15 12821.05 1
3 7500 7500/(1+0.16)^3 = 4804.93 17625.98 1

Cost to recover = 17800 - 17625.98 =174.02

We have utilized all the cash flows but still, the cost of capital is not recovered

Hence we need more than 3 years to cover the cost which is higher than the timeline of the project.

Discounted Payback period = More than 3 years

Hence this project should not be accepted.

Please let me know in case you have any queries and I will be happy to assist you.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A project has an initial cost of $17,800 and produces cash inflows of $7,200, $8,900, and...
A project has an initial cost of $17,800 and produces cash inflows of $7,200, $8,900, and $7,500 over three years, respectively. What is the discounted payback period if the required rate of return is 16 percent?
An investment project has annual cash inflows of $6,100, $7,200, $8,000 for the next four years,...
An investment project has annual cash inflows of $6,100, $7,200, $8,000 for the next four years, respectively, and $9,300, and a discount rate of 17 percent. What is the discounted payback period for these cash flows if the initial cost is $9,500?
You are considering a project with an initial cost of $35,000 and cash inflows of $20,000,...
You are considering a project with an initial cost of $35,000 and cash inflows of $20,000, $15,000, $10,000, and $5,000 over the next four years, respectively. If you require a 13% rate of return and have somehow decided on an appropriate discounted payback period of 3.5 years, should you accept this project? Why or why not? Group of answer choices A. Yes, because the discounted payback period is over 3.5 years B. No, because the discounted payback period is over...
An investment project has annual cash inflows of $4,400, $5,500, $6,300 for the next four years,...
An investment project has annual cash inflows of $4,400, $5,500, $6,300 for the next four years, respectively, and $7,600, and a discount rate of 11 percent. What is the discounted payback period for these cash flows if the initial cost is $7,500?
A project has an initial cost of $15,000 and produces cash inflows of $2,000 forever. Compute...
A project has an initial cost of $15,000 and produces cash inflows of $2,000 forever. Compute the payback period, NPV, IRR, and PI if the required rate of return is 10%.
An investment project has annual cash inflows of $5,100, $3,200, $4,400, and $3,600, for the next...
An investment project has annual cash inflows of $5,100, $3,200, $4,400, and $3,600, for the next four years, respectively. The discount rate is 15 percent. a. What is the discounted payback period for these cash flows if the initial cost is $5,000? b. What is the discounted payback period for these cash flows if the initial cost is $7,100? c. What is the discounted payback period for these cash flows if the initial cost is $10,100?
An investment project has annual cash inflows of $5,000, $3,300, $4,500, and $3,700, for the next...
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.    1.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.)      Discounted payback period years    2.What is the discounted payback period for these cash flows if the initial cost is $7,200? (Do...
A. A project has an initial cost of $57,200 and is expected to produce cash inflows...
A. A project has an initial cost of $57,200 and is expected to produce cash inflows of $19,800, $27,900, and $45,200 over the next 3 years, respectively. What is the project’s internal rate of return? 18.92 percent 26.25 percent 16.86 percent 24.63 percent B. You are comparing two mutually exclusive projects. Both projects have an initial cost of $40,000 . Project A has cash inflows of $21,000 , $18,000 , and $15,000 over the next 3 years, respectively. Project B...
A project has an initial cost of $6,000 and has annual cash inflows of $1,725, $2,165,...
A project has an initial cost of $6,000 and has annual cash inflows of $1,725, $2,165, $2,281, and $2,624 in years 1-4. Assuming a 15% discount rate, find the following for the project. 1. Payback period 2. Discounted payback period
A project has an initial cost of $10,000 and cash inflows of $2,000, $4,000, $6,000, and...
A project has an initial cost of $10,000 and cash inflows of $2,000, $4,000, $6,000, and $2,000 a year over the next four years, respectively. What is the payback period?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT