Question

An investment project costs $23327 and has annual cash flows of $10533 for six years. What...

An investment project costs $23327 and has annual cash flows of $10533 for six years. What is the discounted payback period if the discount rate is 5 percent?

Homework Answers

Answer #1
Year Cash flows Present value@5% Cumulative Cash flows
0 (23327) (23327) (23327)
1 10533 10031.43 (13295.57)
2 10533 9553.74 (3741.83)
3 10533 9098.80 5356.97
4 10533 8665.53 14022.50
5 10533 8252.88 22275.38
6 10533 7859.89 30135.27(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+(3741.83/9098.8)

=2.41 years(Approx).

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