Question

An investment project has annual cash inflows of $4,266, $3,383, $4,947, and $3,402 for the next four years, respectively, and a discount rate of 15%.

What is the discounted payback if the initial investment is $8,000? (Round answer to 2 decimal places. Do not round intermediate calculations)

Answer 1

Answer:

Payback period = Initial investment / Cash flow per year

Discounted payback period = [-In(1- inventment amount * discount rate) / Cash flow per year] /In (1+rate)

Discounted cash flows = Annual cash flow / (1+r)n

Discounted cash flow-

Year	Cash flow ($)	Discounted cash flow ($)	Net discounted cash flow ($)
0	-8000	-8000	-8000
1	4266	3709.57	-4290.43
2	3383	2558.03	-1732.40
3	4947	3252.73	-1520.33
4	3402	1945.10	-3465.44

Payback period = 2.071 years

$8000 (Initial investment) will be received after 2nd year and then between 2nd to 3rd

2 years + (1732.40 / 3252.73)

2 yeras + .533

Discounted payback period = 2.533 years