Question

Suppose a company had an initial investment of $45,000. The cash flow for the next five years are $17,000, $13,000, $14,000, $17,000, and $20,000, respectively. The interest rate is 10%.

What is the discounted payback period?   

___________(Enter only whole numbers)

Answer 1

Discounted payback is 4 years

Year	Cash Flow	Discount factor	Discounted cash flow	Cumulative Discounted cash flow
a	b	c=1.10^-a	d=b*c	e
0	-45,000	1.0000	-45,000	-45000
1	17,000	0.9091	15,455	-29,545
2	13,000	0.8264	10,744	-18,802
3	14,000	0.7513	10,518	-8,283
4	17,000	0.6830	11,611	3,328
5	20,000	0.6209	12,418	15,746
	Discounted payback is the period within which cost of project is recovered.
	Discounted Payback	=	3+(8283/11611)
		=	4 Years