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A project has an initial setup cost of $10,000 and is expected to deliver an annual...

A project has an initial setup cost of $10,000 and is expected to deliver an annual cash flow of $2,200 for ten years. If the appropriate discount rate is 10%, find the discounted payback period. (Round your answer to the nearest whole number.)

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Answer #1

Answer : Below is the table showing Discounted Cash Flows

Year Cash Flow PVF @ 10% Present value of cash Flows Cumulative Cash Flows
1 2200 0.909090909 2000 2000
2 2200 0.826446281 1818.181818 3818.181818
3 2200 0.751314801 1652.892562 5471.07438
4 2200 0.683013455 1502.629602 6973.703982
5 2200 0.620921323 1366.026911 8339.730893
6 2200 0.56447393 1241.842646 9581.573539
7 2200 0.513158118 1128.94786 10710.5214
8 2200 0.46650738 1026.316236 11736.83764
9 2200 0.424097618 933.0147604 12669.8524
10 2200 0.385543289 848.1952367 13518.04763

Discounted Payback Perod = Complete years + (Initial Investment - Cash Flow Recovered) / Cash flow to be recovered

= 6 + (10000 - 9581.573539) / 1128.94786

= 6.37 years or 6 years

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