Question

An investment project costs $21717 and has annual cash flows of $11946 for six years. What...

An investment project costs $21717 and has annual cash flows of $11946 for six years. What is the discounted payback period if the discount rate is 19 percent?

Homework Answers

Answer #1
Year Cash flows Present value@19% Cumulative Cash flows
0 (21717) (21717) (21717)
1 11946 10038.66 (11678.34)
2 11946 8435.84 (3242.5)
3 11946 7088.95 3846.45
4 11946 5957.10 9803.55
5 11946 5005.96 14809.51
6 11946 4206.69 19016.2(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+(3242.5/7088.95)

=2.46 years(Approx).

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