Question

Find the Discounted Payback period for the following project. The discount rate is 9%.

	Project X
Initial Outlay	$17,254
Year 1	$5,559
Year 2	$5,994
Year 3	$5,982
Year 4	$8,300

Round the answer two decimal places.

Answer 1

Discounted cash flow in year 1= $5,100

Discounted cash flow in year 2= $5,045.03

Discounted cash flow in year 3= $4,619.31

Discounted cash flow in year 4= $5,879.85

Cumulative discounted cash flow in year 3= $14,764.34

Discounted payback period= full years until recovery + unrecovered cost at the start of the year/ discounted cash flow during the year

= 3 years + ($17,254 - $14,764.34)/ $5,879.85

= 3 years + $2,489.66/ $5,879.85

= 3 years + 0.42

= 3.42 years.

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