Question

# King Fisher Aviation is evaluating an investment project with the following case flows: \$6,000 \$5,500 \$7,000...

King Fisher Aviation is evaluating an investment project with the following case flows:

\$6,000

\$5,500

\$7,000

\$8,000

Discount rate 14 percent

What is the discounted payback period for these cash flows if the initial cost is 15,000? What if the initial cost is \$12,000? What if the cost is \$16,000?

show all work

#### Homework Answers

Answer #1

I have assumed that cash flows have been received at the the end of the first year so the rate of discounting has been applied from the first year-

Discounted Cashback period will be calculated in how many years the initial cash outlays will be equated with the total discounted present value of cash inflows.

 Year Cash flows Discounting @14% Discounted present value Cumulative DCF 1 6000 .8771 5262.6 5262.6 2 5500 .7694 4231.7 9494.3 3 7000 .6749 4724.3 14218.6 4 8000 .5921 4736.8 18955.4

1. Discounted payback period if initial investment is \$15000

= 3 years +[(15000-14218.6)/4736.8]

= 3 years+.1649

=3.1649 Years

2. Discounted payback period if initial investment is \$ 12000

= 2 years+[( 12000-9494.3)/4724.3]

=2 years+.5303

= 2.5303 Years

3. Discounted payback period if initial investment is \$ 16000

= 3 years+[( 16000-14218.6)/4736.8]

= 3 years+.376

= 3.376 years

Know the answer?
Your Answer:

#### Post as a guest

Your Name:

What's your source?

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Not the answer you're looking for?
Ask your own homework help question