Question

An investment project costs $23891 and has annual cash flows of $12304 for six years. What is the discounted payback period if the discount rate is 19 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

Answer 1

Year	Cash flows	Present value@19%	Cumulative Cash flows
0	(23891)	(23891)	(23891)
1	12304	10339.50	(13551.5)
2	12304	8688.65	(4862.85)
3	12304	7301.39	2438.54
4	12304	6135.62	8574.16
5	12304	5155.98	13730.14
6	12304	4332.76	18062.9(Approx).

Hence discounted Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

=2+(4862.85/7301.39)

=2.67 years(Approx).