Question

# Kerin Enterprises has a project which has the following cash flows: YEAR CASH FLOWS 0-( -R200...

Kerin Enterprises has a project which has the following cash flows:

YEAR CASH FLOWS

0-( -R200 000)

1- 50 000

2- 100 000

3- 150 000

4- 40 000

The required rate of return is 10%. What is the project’s discounted payback period (DPB)? Hint: Use rounded numbers, i.e. no decimal points.

 Year Cash flow × discount rate Discounted cash flow Cumulative present worth Balance to be recovered 0 \$      (200,000) 1.00000 \$      (200,000.00) \$                         - \$      200,000.00 1 \$          50,000 0.90909 \$          45,454.55 \$           45,454.55 \$      154,545.45 2 \$       100,000 0.82645 \$          82,644.63 \$         128,099.17 \$         71,900.83 3 \$       150,000 0.75131 \$        112,697.22 \$         240,796.39 \$                       - 4 \$          40,000 0.68301 \$          27,320.54 \$         268,116.93 \$                       - Capital is recovered fully in year 3 Discounted pay back period is 2 + 71900.83 / 112697.22 2.64

Discounted payback period is 3 years or 2 years, 7 months, 20 days.