Question

project that requires an initial investment of $100,000 and generates the following cash flows:

YEAR	CASH FLOWS
1	30,000
2	35,000
3	40,000
4	20,000
5	19,000

If the cost of capital is 8.5% have a discounted payback period of _______________

Seleccione una:

3.856 years

2.875 years

3.665 years

2.856 years

3.875 years

not enough data to answer

Answer 1

Correct Answer is option E -
3.875 years

Discount rate	8.50%
Year	Cashflow	PV of cashflow	Cummulative
0	-100000	Rs. -1,00,000.00
1	30000	Rs. 27,649.77	Rs. 27,649.77
2	35000	Rs. 29,730.94	Rs. 57,380.70
3	40000	Rs. 31,316.32	Rs. 88,697.03
4	20000	Rs. 14,431.49	Rs. 1,03,128.51
5	19000	Rs. 12,635.86	Rs. 1,15,764.38

Discounted payback period =3 years + (1,00,000 - 88697) / 14431.49
DPP = 3.875 years

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