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?
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).
Get Answers For Free
Most questions answered within 1 hours.